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ECONOMICS REPORT - Trade Dispute Over Boeing and Airbus - 2004-11-10

Broadcast: November 12, 2004

This is Gwen Outen with the VOA Special English Economics Report.

America's biggest exporter is Boeing. It is easy to understand why. Have you ever looked at airplane prices? A big jet plane can cost well over a hundred million dollars.

In fact, trade in civilian planes is so important, it is one of fifteen main areas of negotiation for the World Trade Organization. It is also a cause of tensions between the United States and the European Union.

The biggest competitor to Boeing is Airbus. E.A.D.S., the European Aeronautic Defense and Space Company, owns eighty percent of Airbus. B.A.E. Systems of Britain owns twenty percent.

Last Friday, the European Union requested talks with American officials over a new tax law for companies in the United States. Congress passed the measure last month, and President Bush signed it. It is called the "American Jobs Creation Act of Two Thousand Four."

Exporters like Boeing lose a tax cut that the World Trade Organization had declared illegal. This makes the European Union happy. But the tax cut will not end for three years. And the law provides other tax cuts for many kinds of industries.

Now the European Union is questioning the legality of the new law. Some observers say the Europeans are reacting to a case brought last month by the United States in the World Trade Organization.

On October sixth, the United States asked the W.T.O. to ban government aid to Airbus. American officials say the European Union unfairly provides loans and other support.

On the same day, the European Union answered by asking the W.T.O. to ban government support to Boeing. The Europeans say Boeing receives several forms of aid that represent illegal subsidies. For example, they say Boeing receives special tax treatment from states where it has factories.

At the root of the problem is a nineteen ninety-two agreement between the United States and the European Union. It ended direct aid for Airbus. But it permitted Airbus to receive help such as long-term loans at low rates of interest. At the time, Airbus was still developing its business. Last year, for the first time, it built more planes than Boeing.

Airbus uses the loans to develop new airplanes. The United States calls this “launch aid.” The American trade representative says Airbus received more than six thousand million dollars this way for its newest plane, the huge A-Three-Eighty.

This VOA Special English Economics Report was written by Mario Ritter. This is Gwen Outen.