Showing posts with label Airbus. Show all posts
Showing posts with label Airbus. Show all posts

Sunday, September 6, 2009

Why the WTO Rocks

I'm still waiting for a rabid article exhaling the glorious victory the GOP had over one of Obama's ridiculous "tsars." I leave that duty to our more domestic oriented writers. But I did see something that would otherwise have flown underneath our radar. The WTO has ruled against Airbus and the EU for "illegal subsidies" that apparently went into its A380 passenger liner. Obviously this ruling will be contended by Airbus and the EU, but some people have an improper correlation between the WTO dispute process and an actual legal court. In comparison to judicial bodies (especially international ones), the WTO moves relatively quickly. Primarily because the evidence is produced by the conflicting parties in a brief (and not a long process filled with motions and counter motions as we are accustomed too) that is ruled on by economic experts.

Moving the temporal argument aside, the second article claims that various European governments have stated they won't stop their investments into Airbus despite the ruling. Obviously if this were actually a concern than the WTO would long ago have been ruled obsolete as an international organization (like the UN has become), but we do have recourse that our good Canadian media friends fail to take into account. If a the Dispute body rules against a country(ies) and they continue to defy the ruling after all appeals have been conducted than the offended party is allowed to pursue reciprocal tariffs on the offending countries goods to equal the "damages" that have been set by the WTO ruling. This is how the WTO "collects" and brings its members in line (far more effective, in my opinion, than any other international body). A similar situation happened before the elections in 2004 when the US was found to have illegal tariffs on steel. When the ruling came out, Bush refused to lift the tariffs and the various EU members involved in the dispute put high tariffs on specific electoral goods (Ohio's Harley Davidson's and Florida Oranges) that swiftly resulted in the US lifting it's tariffs (see WTO DS248-9, 251-4, 274).

All of this background is merely to say, that some media outlets may resort to the "countries will ignore it, big whoop" (general argument in IR) but this doesn't apply to the WTO. The real question is how the the 3 month appeal process will work out. Since I doubt that Airbus can stand on its own without being propped up by the Europeans, especially when they are in such dire competition with the Boeing Dreamliner, the real question is how will Obama choose to respond. Since we are the world's largest consumer, there is considerable amount of room for US to threaten European goods (a situation made even more opportune due to the precarious economic situation) and bring Airbus to heal.