[Congressional Record Volume 151, Number 33 (Thursday, March 17, 2005)]
[Senate]
[Pages S2970-S2971]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




   STATUS OF U.S. AND EUROPEAN UNION AIRCRAFT FINANCING NEGOTIATIONS

  Ms. CANTWELL. Mr. President, today the President of the United States 
nominated former Representative Rob Portman to serve as our next U.S. 
representative and trade ambassador. I am hopeful that my colleagues on 
the Senate Finance Committee will move expeditiously to hold a hearing 
and approve his nomination as soon as possible.
  In January of this year, the current U.S. trade representative and a 
team of European Union negotiators agreed to sit down to try to 
negotiate a new agreement for how aerospace markets will work in the 
future. We are 60-days into the 90-day period that they set for their 
own discussions. Even though our current trade representative, 
Ambassador Zoellick, has been confirmed as Deputy Secretary of State, 
he is going to continue negotiating on behalf of the U.S. Government. I 
know these negotiations are in very capable hands, and I applaud the 
aggressive stance being taken by the Administration on these trade 
talks.
  These trade talks were entered into by both sides knowing full well 
that World Trade Organization sanctions were a real possibility if the 
playing field in aerospace does not become fairer. Both sides 
demonstrated a willingness to get rid of unfair subsidies and a good 
faith stance on both sides to negotiate. That is why I come to the 
Senate floor now to make sure the European Union knows we in the United 
States Senate remain very committed to these discussions. We are also 
very concerned that they are not at the table in good faith, if in fact 
the clock is ticking away and we are not making progress towards the 
goal of eliminating unfair subsidized financing of airplanes.
  That 90-day clock is indeed ticking, and if a settlement is going to 
be reached on this matter without WTO intervention, it needs to happen 
immediately. There are fewer than 30 days left in the agreed time 
frame.
  From the news reports, these discussions seem to be at a standstill. 
Obviously, these discussions need to be re-energized and, hopefully, 
achieve a successful end result. Otherwise, as I have mentioned, the 
parties will be forced into a WTO battle, and I am sure Congress will 
consider other tools that are at our disposal, as the administration 
continues to seek swift and firm action in this case.
  To date, the Bush administration and the trade negotiators have shown 
solid leadership and strong resolve, first in bringing this case to the 
WTO last fall. Second, it approached subsequent negotiations with the 
EU in a serious commitment to reach an end resolution.
  I have to say, in the beginning it seemed that the Europeans were 
equally interested in a settlement because Commissioner Mandelson, the 
European Union's chief negotiator, signaled in a public comment, ``We 
need to make progress, and I intend to do so.'' This was reported by 
the Bloomberg News Service. He also said: ``The objectives of the 
negotiations are primarily to establish fair market-based competition 
between Boeing and Airbus.''
  Despite these public comments, EU negotiator actions and subsequent 
rhetoric suggest something different than ending unfair subsidized 
financing. Instead of a genuine commitment to end subsidies, the 
Europeans have walked away from their commitment to this goal.
  Now, it seems that the discussions may be dragged out over a much 
longer period of time, maybe avoiding resolution or delaying a path to 
actually eliminating these subsidies. It is very important that the EU 
meet its commitment to end these negotiations on time.
  When these parties reached an initial accord in 1992, a number of 
important issues were unresolved. We do not want to make the same 
mistake this time by leaving too much on the table, only to see the WTO 
come in, in a process that we know will be more of a winner-take-all 
process.
  In particular, EU negotiators must remain intent in staying at the 
table to discuss the issue of launch aid, the single most troublesome 
issue that I think we need to discuss. The United

[[Page S2971]]

States cannot stand by while the EU stalls these discussions about 
launch aid.
  Today, we all know the aerospace industry remains very important to 
the United States. The aerospace sector generates about 15 percent of 
our Nation's gross domestic product. However, I think the real issue 
for us is that the United States builds and finances planes through 
Wall Street and the private marketplace. Our domestic companies should 
not have to compete against the backing of European governments, 
against the deep pockets of governments that distort the global 
marketplace.
  If, in fact, the EU drags its feet, how will these issues be 
resolved? Will they continue to argue that these launch aid subsidies 
are not the issue? Launch aid has provided Airbus with over $15 billion 
in subsidization, really unfairly propping up Airbus at the expense of 
the U.S. aerospace market and its workers. In the last 15 years, the 
U.S. aerospace industry has lost about 700,000 jobs.
  Essentially, launch aid becomes a risk-free, low-cost government bank 
for the development of new lines of aircraft. The company only needs to 
repay the loans if the new product succeeds. Nowhere in our private 
sector does anybody, any company, get such a deal that they only have 
to pay the banker back if, in fact, the product succeeds. So this is a 
very important issue.
  Obviously, launch aid puts our domestic manufacturers at an unfair 
competitive disadvantage. Airbus remains unfettered by the realities of 
the marketplace when launching new jetliners, while American companies 
must assume substantial market risk every time they unveil a new 
product. If Airbus bets on the wrong plane, no problem, no harm, no 
foul, the loans are forgiven. This means Airbus can proceed with the 
design and production of a new plane without ever turning a profit on 
an existing product line. It also means that Airbus can undercut the 
price and pursue more aggressive financing practices than the U.S. can. 
Obviously, you can see the end result is that Airbus can offer a 
cheaper plane in the marketplace by unfairly subsidizing the financing 
of their planes.
  Well, nevertheless, Airbus has continued, even though it has grown 
into a mature company, to receive 33 percent of the funding for its 
product development from European governments since 1992, translating 
into billions in launch aid loans at below market rates. At the same 
time, it has avoided an additional $35 billion in current debt due to 
this subsidy. This launch aid distorts the global marketplace.
  What we want to see in aerospace is competition that drives 
opportunities for the consumers. I believe that is why the United 
States has taken its aggressive position in saying that it will go to 
the WTO if necessary. I think it is time now to make sure that these 
negotiations between the United States and the European Union, which 
originally were announced in January, are completed as soon as 
possible. But maybe it is not surprising that they are lagging at this 
moment.
  I say that because Airbus has moved ahead with a plan to submit $1.7 
billion in an application for new launch aid for a new airplane, the A-
350, which is designed to compete head-to-head with the Boeing 787. 
While negotiations to end launch aid are ongoing, there is 
simultaneously a new application to the European Union to support 
launch aid for a new plane. I believe that is probably why the Airbus 
CEO stated, about the new plane, the A-350: `` . . . is easily 
financeable [sic] by Airbus without launch aid, but as long as there is 
refundable launch aid available, we will apply for it.'' This means, as 
long as they can get refunds later on launch aid, they will apply for 
it.

  So while the European Union is supposedly at the table negotiating 
with the United States about getting rid of launch aid subsidies, it is 
continuing to discuss deals about launch aid for new planes.
  It is clear that this does not paint a pretty picture. The European 
Union cannot have it both ways. It cannot pretend to be serious about 
negotiations with the United States to end launch aid subsidies and all 
the while sending a wink to Airbus about launch aid for the A-350.
  The EU must level with the American public and the global community 
on whether it is serious about ending unfair subsidized financing of 
their aircraft.
  Specifically, I think Commissioner Mandelson and the EU should 
consider the following actions: first, EU negotiators should declare 
their opposition to the launch aid for the A-350 and summarily reject 
the pending application that Airbus has prepared. Second, the EU should 
also reject all launch aid for future aircraft models.
  We need to address these unfair subsidized financing issues and put 
an end to launch aid so that aircraft financing is on a level playing 
field. Failure to follow these processes will lead to swift action by 
our administration and the U.S. Government. Today, the U.S. stands 
ready to reach a resolution on this issue, but we must have a willing 
partner. The White House has expressed a strong commitment to finding 
an agreement, and the President has the backing of this Senator, and I 
believe many in Congress, to seek a resolution to this issue. I am sure 
my colleagues will join me in considering all options at our disposal 
to help find a resolution to this issue.
  Last week, I was invited to the Smithsonian for a commemorative 
celebration of Space Ship One, a successful marvel, sponsored by Paul 
Allen and many others. The celebration marked the successful launch of 
the first commercial, manned spaceflight-something from which 
individual consumers will benefit in the future. The Smithsonian 
National Air and Space Museum gave that award, and the flight signaled 
a new chapter in aviation history. There's something about the spirit 
of competition, about a group of people who came together to compete 
towards an exciting new chapter of aviation, and a level playing field 
of competition that delivered a great result.
  Which is exactly what we have to get from the Europeans--a level 
playing field, to deliver a better result for the entire global 
community, for consumers, and for purchasers of aerospace and 
commercial aviation equipment by guaranteeing that we are going to have 
a level playing field.
  I hope that these negotiations will continue in earnest and I am 
confident that Ambassador Zoellick and the new nominee, Mr. Portman, 
will continue to be aggressive in resolving this issue. I believe we in 
the United States have fostered an environment for true competition for 
the private sector, to drive this industry to the next level. However, 
we need fair and balanced trade to make that successful.
  I hope the Europeans will not stall these discussions, but that they 
will embrace the idea of fair competition as the end result.
  I yield the floor and suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The legislative clerk proceeded to call the roll.
  Mr. FRIST. Mr. President, I ask unanimous consent that the order for 
the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.

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