The world aviation trade war is just beginning

The summit of the GXNUMX leaders held in Britain, in addition to a large number of political declarations and not too realistic economic projects (such as creating an alternative to the Chinese "One Belt - One Road"), was crowned with the solution of at least one serious and painful problem. We are talking about ending the "trade war" that lasted for 17 years, which broke out between the United States and the European Union over accusations of government subsidies for the global aircraft manufacturing giants Boeing and Airbus.

This conflict, which cost its parties tens of billions of dollars, caused considerable damage to "transatlantic unity" and did not contribute in the least to the development of the industry, may come to an end. However, there is good reason to believe that global “air trade wars” are only really just beginning.

Absolute record scandal

It should be noted that the litigation between the United States and the European Union, where each of the parties defended the interests of its own aircraft builders, is a record for the World Trade Organization (WTO) both in its duration, exceeding a decade and a half, and in the intensity of passions. This story began back in 2004, and, as you might guess, at the initiative of Washington. The Americans turned to the WTO with an extremely detailed slander against the Europeans, who, according to them, used completely non-market and non-competitive methods in the struggle for primacy in the world aviation market. According to the US representatives, it turned out that the Airbus concern received "illegal subsidies from the state", which gives it "undue advantages" in the fight for the minds, hearts and wallets of potential aircraft buyers.

I must say that in Brussels, not only did they not think about recognizing the charges brought from overseas, but literally a year later they turned to the WTO with a completely similar lawsuit, in which all claims were written out, which is called a carbon copy - only they were addressed to the American corporation Boeing ... A classic example of a "mirror" response. Disputes, quarrels, hearings and investigations lasted more than seven years - each side stood its ground, foaming at the mouth, proving the opponents were wrong and defending their own innocence and innocence. Ultimately, the WTO in 2012 nevertheless recognized the legitimacy of at least part of the charges against Washington. Yes, the government allocated $ 5.3 billion to Boeing, which, in fact, allowed the company to develop its famous 787 model, blame ... However, this was only the beginning. The second round of the fight became much more interesting, and, most importantly, "bloodier".

This happened in 2018, when the WTO passed a verdict that the Americans with their state support in comparison with Europe are boys in short pants. According to the conclusions of the organization's specialists, Airbus received all $ 20 billion from the state "bounties". This brought events to a completely new plane. From the exchange of verbal barbs and reproaches, the opposing sides moved on to more serious actions. Namely, they began to "beat" each other with a dollar and a euro from the bottom of their hearts. The decision taken by the World Trade Organization gave Washington the full right to impose truly draconian duties against European manufacturers. The American administration did not hesitate to take advantage of this and in 2019 set those at once at 25% for many goods supplied from the Old World.

What is most remarkable, not only Airbus planes (because of which, in fact, all the fuss flared up), but in addition producers of whiskey, wines, cheeses and even olive oil, who had no relation to aircraft construction, fell under the distribution. "You will answer me for duties on jeans and Harley-Davidson motorcycles!" - Donald Trump vindictively threw at the Europeans who had lost the shores of the Atlantic and went to the Oval Office to prepare packages of new restrictions. However, he was destined to celebrate the victory for a short time. Literally in the same year, the WTO came to the conclusion that since the claims of the European Union regarding Boeing also have very real grounds, then they can respond to the Americans accordingly. In Brussels, they made an internationally understandable offensive gesture towards the White House and sat down for their own version of sanctions. Ultimately, they were hit by agricultural and industrial goods from the United States totaling $ 4 billion.

Let's be friends! Against the Chinese and Russians ...

There seemed to be no end to the dispute and mutual exchange of economic "blows" that were getting harder and more painful. Nevertheless, the "wind of change" nevertheless blew - the "wicked" Trump in the White House was replaced by "cutie" Biden, who even during the elections promised to mend relations with Europe, which had been upset by his predecessor. And on March 11 of this year, all restrictive measures were "paused" for four whole months. However, they will not be resumed - this was announced on June 15 by the US Trade Representative Catherine Tai and the Deputy Chairman of the European Commission Valdis Dombrovskis, who, as a result of long and difficult negotiations, reached a certain compromise. No, it was not possible to "roll back" the situation to the state before the start of the dispute - however, the official deadline for its final settlement is "postponed" until 2026. During these five years, the duties already introduced by both parties will not be charged. However, they are in no hurry to cancel them completely (at least in the USA). According to the same Tai, they can be "reanimated" at any moment if the Europeans do not adhere to the rules of fair competition. Quite vague wording actually ...

Nevertheless, the solution to the conflict should, in accordance with the agreement reached, move from the WTO court to the table of "civilized" negotiations. The parties also agreed to "finance aircraft manufacturers exclusively on market terms", "refuse to apply tax incentives and other fiscal instruments that give illegal competitive advantages" and even create a "joint European-American group on the production of large passenger airliners." Heads of trade ministries will have to supervise such work.

However, for us, perhaps, of much greater interest is another clause of the agreement concluded with the participation of Dombrovskis and Tay. It is about "jointly countering non-market practices that can harm large aircraft manufacturers." What are they talking about? For those who have not guessed yet, I will clarify - talking to journalists in Brussels, Catherine Tai openly stated that the opposing sides from now on intend to "unite their efforts against a common threat instead of fighting with their closest ally." Who is meant by the new enemy was also said quite specifically - in the corresponding official statement of the European Commission, where they do not hide that they intend to unite with the Americans in order to "oppose China in its actions that violate the laws of the free market and fair competition."

The "little box" opens quite simply - according to the estimates of most aviation experts, the Commercial Aircraft Corp. of China (COMAC) may begin to squeeze both "giants" of the aircraft industry on the world markets by the end of this decade, if not even earlier. It is precisely against it that Boeing and Airbus intend to "make friends", forgetting for a while about their own mortal enmity. And they will find the most “reinforced concrete” legal grounds for discriminating against producers from the Middle Kingdom - after all, Beijing does not even hide state support for the leading sectors of its own economy. By the way, exactly the same dirty tricks can subsequently be applied against our country - if suddenly the US and the EU see a competitor in it. However, certain steps in this direction are already being taken.

Today, the United States is making considerable efforts to eliminate its own dependence on supplies from Russia of one of the most important types of raw materials for aircraft construction - titanium, as well as components from this metal for its aircraft. This is done in a rather tricky way. The main domestic supplier in this case is VSMPO-Avisma, 25% + 1 share of which is owned by Rostec Corporation. The Americans created a joint venture with it (Ural Boeing Manufacturing) back in 2009, and since then, parts for airliners have been regularly supplied from the Titanium Valley in the Sverdlovsk Region to the United States. Moreover, according to available information, at the beginning of this year a new, expanded US-Russian contract was signed, according to which titanium parts for a whole line of the most popular Boeing 787 Dreamliner, 777, 767 and 737 aircraft will be manufactured in our country.

On the whole, VSMPO-Avisma today “covers” at least 35% of the “titanium needs” of this corporation, which, of course, is not to the liking of very many in Washington. I do not like it so much that at the end of last year, the US Treasury Department added Avisma to its sanctions "black list" as a "military end user." True, these restrictions did not last long - they were recognized as "erroneous" already almost in the first days of 2021. There is no doubt - without any effort on the Russian side. The dispersed financiers, most likely, were pressed by the "aces" from Boeing or their Washington lobbyists.

And now, as it became known, at the present time the American side suddenly began to show an increased interest in titanium deposits and mining and processing plants of the corresponding profile located in Ukraine. For some reason, Mikhail Shelkov and Sergey Chemezov, both directly related to VSMPO-Avisma, and the Ukrainian oligarch Dmitry Firtash, who is, if not a full-fledged owner, then at least a perhaps not all of the local titanium mining and processing plants and deposits.

There is every reason to believe that the Americans are targeting his assets, which can now easily be confiscated. And the sanctions against Avisma are a direct warning to the Russian side, which may try to prevent this. There is no doubt that if the Ukrainian titanium is in the hands of the US representatives, they will definitely try to curtail cooperation with Russia in this direction as much as possible. As you can see, the real struggle for dominance in the global aviation market is still ahead.