A difficult week for grants

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Last week was one for & nbsp; the subsidies worked.

On Thursday, Airbus announced the end of the A380 program after Emirates Airlines, based in Dubai, canceled orders for 39 giant aircraft. This left a backlog too small to support production beyond 2021. Airbus & has already delivered 251 aircraft at the end of the program. The financial blow, though substantial, will be mitigated by not having to fully repay the launch aid provided by European governments.

According to Complaint at the WTO filed by the United States in 2004, the governments of Germany, France, the United Kingdom and Spain have subsidized the design and development of the entire family of Airbus aircraft, including Grants to develop and modernize manufacturing sites for the development and production of the A380. The United States claimed that it was illegal subsidies. The WTO concluded that government loans were not granted on standard commercial terms and were therefore problematic.

The interesting part of this mess is that Airbus was only obliged to repay the loans once the program was transformed. cost-effective on production costs. Airbus said it had reached the break-even point on the A380's production costs in 2015, so repayments would have started once the profits made on each aircraft. But Airbus has also reduced its production volumes this year. As a result, he is probably no longer making a profit and the repayments of the Launch Aid may stop. And when production ends in 2021, there will be neither profit nor refund. European Commission says European taxpayers paid start-up financing & nbsp;for the three Airbus programs in the wind category – – the A330-200, the A340-500 and -600 and the A380 – & nbsp;at 3.7 billion euros, or 4.2 billion dollars.

The A380 was not the only program that did not meet ambitious expectations. The A340 program ended in 2011 after only 375 deliveries. Europeans also argue that Boeing receives substantial subsidies. the The WTO has ruled that the subsidy took the form of a further reduction of the main aerospace business tax in the state of Washington, which was approved in 2013, while Boeing was consideringinstallation of the composite wing for his new 777X.

It's not the same thing as a manufacturing plant, but it's also the week that GE decided to downsize its future Boston headquarters building. He will have to repay the $ 87 million grant. And Amazon gave up its $ 3 billion grant to build its headquarters in Long Island City, NY. And do not forget all the madness happening in Wisconsin with the $ 4 billion grant to Foxconn for the construction of what was originally a Gen 10.5 LCD panel plant. & nbsp;One may wonder if this ends up resembling the mania of tax incentives around the production of motion pictures, which many & nbsp; people recognize being a bad idea.

Subsidies to Chinese SOEs are one of the key issues the US is discussing with China during the ongoing trade negotiations. We are talking about a very different scale here: free land, subsidized capital goods, tax holidays. This has led to wholesale commodification of many industries such as steel, aluminum, solar panels, LED lights and probably cars later. Each & nbsp; country & nbsp; play this game, at different levels and with very little consistency or transparency. I think subsidies are the most pernicious problem affecting trade around the world, and last week was a good example.

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The past week has been devoted to unblocked grants.

On Thursday, Airbus announced the end of the A380 program after Emirates Airlines, based in Dubai, canceled orders for 39 giant aircraft. This left a backlog too small to maintain production beyond 2021. Airbus will have delivered 251 aircraft at the end of the program. The financial blow, though substantial, will be mitigated by not having to fully repay the launch aid provided by European governments.

According to the complaint lodged at the WTO by the United States in 2004, the governments of Germany, France, the United Kingdom and Spain have subsidized the design and development of the entire family of Airbus aircraft, including grants to develop and modernize their manufacturing sites. the development and production of the A380. The United States claimed that it was illegal subsidies. The WTO concluded that government loans were not granted on standard commercial terms and were therefore problematic.

The interesting part of this mess is that Airbus was only obliged to repay the loans when the program is profitable on the production costs. Airbus said it had reached the break-even point on the A380's production costs in 2015, so repayments would have started once the profits made on each aircraft. But Airbus has also reduced its production volumes this year. As a result, he is probably no longer making a profit and the repayments of the Launch Aid may stop. And when production ends in 2021, there will be neither profit nor refund. European Commission says European taxpayers paid start-up financing A330-200, A340-500 and -600 and A380 – for a total of three Airbus wind programs – representing at 3.7 billion euros, or 4.2 billion dollars.

The A380 was not the only program that did not meet ambitious expectations. The A340 program ended in 2011 after only 375 deliveries. Europeans also argue that Boeing receives substantial subsidies. The WTO ruled that the subsidy took the form of a further cut to the main tax on aerospace companies in Washington State, which was approved in 2013 when Boeing was considering building its wing system. composite for its new 777X.

It's not the same thing as a manufacturing plant, but it's also the week that GE decided to downsize its future Boston headquarters building. He will have to repay the $ 87 million grant. And Amazon gave up its $ 3 billion grant to build its headquarters in Long Island City, NY. And do not forget the madness that prevails in Wisconsin with the $ 4 billion grant to Foxconn for the construction of what was originally a Gen 10.5 LCD factory. One may wonder if this ends up resembling the mania of tax incentives around film production, which many people consider a bad idea.

Subsidies to Chinese SOEs are one of the key issues the US is discussing with China during the ongoing trade negotiations. We are talking about a very different scale here: free land, subsidized capital goods, tax holidays. This has led to wholesale commodification of many industries such as steel, aluminum, solar panels, LED lights and probably cars later. All countries play this game, at different levels and with very little consistency or transparency. I think subsidies are the most pernicious problem affecting trade around the world, and last week was a good example.