Trade fights with Boeing, Airbus are here for long haul

Out in the wilds of YouTube you can find a compilation of videos depicting athletes and sports teams prematurely celebrating victory. They jump, they laugh and hug, they play to the crowd, all the while oblivious to the other team scoring the winning goal/point/run. Cheers quickly turn to shock, and then to tears.

Those inclined to celebrate a World Trade Organization ruling in September that Airbus has been relying on subsidies that are illegal under international trade law, or agree with Boeing that a WTO decision last week striking down Washington state’s subsidies to it is really a Boeing victory, might spend some quality time with that video.

The lesson they should take away is that “it ain’t over till it’s over.” And in trade fights, it’s almost never over, and never almost over.

It’s especially not almost over in the current U.S. political environment, with a new administration that got there in part on the appeal of its stance on trade.

Through the campaign, and continuing after the election, a constantly voiced criticism of Donald Trump’s rhetoric on trade was that he would wind up touching off trade wars across the globe, to the ultimate detriment of the U.S. economy, its companies and workers.

Not exactly. Trump as president may pour a few buckets of gasoline on already smoldering disputes, and he may find a few new ones to ignite. But one reason Trump did well with the trade issue is the perception in much of the country that the United States is already involved in multiple trade wars, and is on the losing side of many of them, to the detriment of the economy, companies and workers.

That point tends to get ignored in our corner of the world which, on balance, tends to come out on the positive side of the trade ledger. Boeing sells airplanes all over the world. Washington farmers grow wheat, apples, hay and dozens of other commodities sold beyond our borders. Locally based companies such as Microsoft, Amazon and Starbucks export tech and retailing services. Even tourism is an export of sorts when foreign visitors check out our mountains, museums and wineries.

But even in Washington you can find pockets where communities, industries and workers haven’t fared as well in the trade equation. And in places such as the Midwest, it’s not pockets but swaths of the region where people see trade as a losing proposition.

While Boeing benefits from globalization of the aerospace industry, it also benefits from the sort of practices that trigger trade disputes, as well as popular sentiment about trade, which it can harness in making its case for more support at home and for enforcement against competitors from abroad.

Hence the unceasing wrangling between Boeing and Airbus. The latest WTO case involves state incentives for building the 777X in Washington. The WTO ruling was a mixed bag, allowing for wide interpretation, in which both sides happily indulged. Airbus crowed that the ruling “extends the WTO’s earlier condemnation of massive illegal subsidies to Boeing to $26 billion in the form of wholly nonrefundable corporate welfare. This is the single largest state-level instance of corporate welfare in U.S. history.”

Boeing was having none of that. “Today’s decision is a complete victory for the United States, Washington state and Boeing,” said J. Michael Luttig, Boeing’s general counsel, in a statement. “The WTO found in September that Airbus has received $22 billion in illegal subsidies from the EU and that without these subsidies neither Airbus itself nor any of its airplanes would even exist today. By contrast, in rejecting virtually every claim made by the EU in this case, the WTO found today that Boeing has not received a penny of impermissible subsidies.”

Before anyone gets too giddy about their victory, this saga has many more chapters to run, involving negotiations and filings and appeals. The next chapter, however, may come in the form of a WTO decision on Airbus’ contention that the U.S. hasn’t complied with an earlier ruling on subsidies for the 787.

And where is China, a frequent villain in arguments about trade policy, in all this? Not as far removed as you might guess. There’s a school of thought that says China will continue milking both Boeing and Airbus for production investment and technical know-how until it can get its own commercial aviation industry established to dominate a market both companies are counting on for growth. When that day arrives, look for trade disputes that dwarf the present tiffs by comparison.

In the meantime, U.S. trade negotiators can occupy their time fighting with their counterparts over, to name a few industries of local interest, commodities like logs and softwood lumber and software-embedded intellectual property. Administrations in the other Washington come and go; fighting about trade, however, is a permanent resident.

Bill Virgin is editor and publisher of Washington Manufacturing Alert and Pacific Northwest Rail News. He can be reached at bill.virgin@yahoo.com.

This story was originally published December 3, 2016 at 11:01 AM with the headline "Trade fights with Boeing, Airbus are here for long haul."