As a member of the European Parliament, it is my privilege to work frequently with my counterparts in the US Congress on issues of common interest to members of the world’s two greatest trading powers – who are also partners at the core of the transatlantic alliance. Europe has long valued the interest of the US in our mutual security, as well as the generosity of the American people as stalwart supporters of Nato. Despite occasional disagreements, the longstanding partnership and goodwill spanning the Atlantic have stood the test of time and the foundation of our mutual prosperity and common economic aspirations.

However, I write out of a deep and genuine concern that the health of our mutually beneficial trade partnership is being compromised by two bitter commercial disputes – disputes that threaten to poison long-established relationships and that risk replacing trade partnership with a broad-based trade battle. The first dispute is the rhetorical attack on Europe by Boeing and many of its political patrons in the US because that company failed to be selected for a major aerial refuelling tanker replacement programme for the United States Air Force. The second dispute is an unrelenting feud between Europe and the US concerning how the two powers partner with their aerospace industries – a dispute now being drawn out in two complicated cases presently before the World Trade Organisation.

First, the tanker issue: in Europe, we believe in the importance of protecting the integrity of fair and open competition for all competitors. This European policy has created many benefits for US-based defence companies, as European countries spend more than $4 with American defence contractors for every $1 the US government spends with European companies. With this as a backdrop, we note favourably the tanker contract award to a team of companies led by Northrop Grumman – a team that includes some European companies, even though much the larger part of the KC-45 tanker will be produced in the US. Many major US defence contractors rightly see the US tanker award as an important development – one that demonstrates the benefits of transatlantic collaboration on military programmes. Lockheed boss Bob Stevens said recently that the KC-45 award was “positive” and that it demonstrated that US markets are open to European products, just as European markets have long been open to those from the US. Stevens went on to say that US companies that seek to hide behind protectionism “will only grow weaker until they are protected to death”.

Yet, such protectionism seems to be exactly the agenda of Boeing and its apologists in the US Congress. Some of my American political counterparts have been engaging in all manner of histrionics, continually portraying Airbus, its parent company and even certain European member states – Nato members! – as “unreliable” aerospace partners. I must say this rhetoric has not gone unnoticed in Europe.

With respect to the US/European dispute about government support for aerospace, this is the second issue that runs the risk of creating widespread ill will and damage to trade relations. In 2004, under pressure from Boeing, the US unilaterally withdrew from a treaty agreement between the US and Europe on trade in large civil aircraft and brought a lawsuit against the European communities concerning the loan-based financing and research and development of Airbus aircraft. Europe had no choice but to immediately respond with complaints about the way US research and development grants subsidise Boeing’s commercial activity. Boeing’s hysterical insistence that this is a case of “saints and sinners”, ignores the reality: government partnership with aerospace is a reality worldwide, in the US, Brazil and Russia through cash and in-kind research grants and in Europe, Canada and Japan through loans. It is now perfectly clear that the issue is not about trade. Instead, it seems to have become an attempt to weaken Airbus outside the normal competition of the marketplace.

While the tanker award is a win-win for European and American labour that supports high-paying jobs and strengthens a common industrial base in the west, the outcome of the two WTO cases are, at best, a roll of the dice and, at worst, likely to enhance the acrimony between key trading partners to the sole benefit of third parties. Given Boeing’s record of repeatedly dodging WTO and GATT rulings on illegal tax breaks, their choice of the WTO as an instrument to attack Airbus seems more cynical than motivated by any genuine desire to ensure fair play. It is time to get our governments together to negotiate an agreed framework for co-operation with the civil aircraft manufacturers to provide a pragmatic balance and a level playing field in a rules-based system. And why now? The parties have now had a chance to fully air their grievances and hear the evidence from the other side and should be able to craft a compromise based on a realistic assessment of the situation. I would call on the USTR to recall that the WTO dispute settlement process is designed to encourage negotiations, not punitive tariff expeditions between allies. Should the US fail to heed this logic, it will gain little by waiting for a panel report. In my opinion, Europe cannot negotiate until a similar report is released on Boeing’s subsidies, leaving the parties substantially where they are today with duelling allegations, save for the lost time and the increased acrimony. An agreement to suspend the cases now for the purposes of negotiating a compromise would be a welcome sign of harmony in our essential alliance. Acting as an apparent tool of Boeing, continued insistence on unilateral surrender by Europe as a prerequisite to even discussing a settlement will gain the US little in the way of respect. Neither is any likely WTO sanction, years in the future, likely to go nearly as far or be as one-sided as present US demands.

There are only two companies in the world today that are capable of integrating the manufacture of large civil aircraft. These valuable enterprises are in the west and it is essential to our mutual technological security that they remain strong and competitive. It is time for this feud to end and for us to put the past behind us. If the governments of the transatlantic alliance can work at this, they may find they can create a great future for their industry as leaders in a globalised world.

As to the tanker award, the ground rule of procurement is that no company wins the bid every time. Most companies understand that rule, even if Boeing supporters do not. 
                                             

Comment published in Financial Times on September 11, 2008