BOOK REVIEW / Jumbos scrambling for the public trough: 'Dogfight' - Ian McIntyre: Praeger, 34.50 pounds

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The Independent Online
IN FEBRUARY 1987, President Ronald Reagan dispatched two senior US trade officials to Europe. Their mission was to make plain to the governments of Britain, France, Germany and Spain just how angry the United States was about the state subsidies being showered on the aircraft manufacturer Airbus Industrie, Europe's answer to Boeing.

It was the aeronautical equivalent of gunboat diplomacy. The reception from the four European partners in Airbus was, to put it mildly, frosty. In London, Sir Geoffrey Pattie, then a junior minister at the Department of Trade and Industry, dressed down the two jetlagged Americans in language that made his own civil servants squirm. Although the response in Paris and Bonn was more measured, the message was the same: Yanks go home.

Six years on, the issue remains high on the political agenda. All this week, Bill Clinton has begun making belligerent noises about the excessive levels of subsidy to Airbus. What better time, then, for an analysis of what the row is all about, where it began and why it threatens to blow up into the mother of all trade disputes?

Ian McIntyre's book is a graphic account of the battle for supremacy between the US aircraft makers, Boeing and McDonnell Douglas, and Airbus Industrie. Supported by copious research, Dogfight charts how the two US aircraft makers grew more and more concerned the further Airbus ate into their market, by fair means or otherwise.

To understand why the stakes, both political and commercial, are so high it is necessary to appreciate the sheer scale of the industry. McIntyre helpfully sets this in context with a battery of figures, the most salutary of which is that it costs dollars 3bn-dollars 5bn ( pounds 2bn- pounds 3.5bn) to build an airliner from scratch. Thus, each time Boeing or McDonnell Douglas launch a new aircraft programme, they bet the ranch. Small surprise that when Airbus came along - its hands in the European taxpayers' pocket and its nose in the 'public trough' - the alarm bells began to ring in Seattle and St Louis. The Americans claim Airbus has received dollars 6bn in direct susbidies - or dollars 8.5m for each aircraft built. The Europeans insist their US competitors have received dollars 23bn in indirect subsidies - military, space and research and development contracts. There can be little doubt Airbus is winning the dogfight - McDonnell Douglas, once the world's second-biggest manufacturer of jet airliners, is on the point of extinction as a civil aircraft company.

McIntyre, quite rightly, exposes Airbus's soft underbelly. Because the consortium does not publish proper financial accounts, a result of its status as a groupement d'interet economique, there is little incentive for anyone to believe the protestations that it is not being unfairly subsidised. He also exposes the 'slipshod' methodology used by Airbus when building its counter-case against the Americans, and regales the reader with endless examples of Airbus's blunt approach to winning customers. Thai officials, for instance, are said to have been threatened by an Airbus salesman with cuts in European imports of tapioca - Thailand's second-biggest export - if an order was switched to Boeing.

However, the book largely glosses over the way Boeing has been able to use the profits from its jumbo jet monopoly to subsidise the rest of its product range. McIntyre also repeats, without challenge, the American charge that Airbus enjoys the advantage of a controlled home market - tell that to British Airways, which has never bought one Airbus aircraft.

Ultimately, as McIntyre himself concedes, the two sides ended up like punch- drunk boxers, slugging their way to a draw. In a settlement brokered through the General Agreement on Tariffs and Trade last July, the Europeans and Americans agreed to cap both direct and indirect subsidies to aircraft manufacturers.

Dogfight lacks a full account of the deal, however, because it went to press two months earlier. Had McIntyre's deadlines been tighter he would have been able to record that in December the four Airbus partners and Boeing kissed and made up, and buried the hatchet in McDonnell Douglas's back, by agreeing to examine the joint development of a super jumbo seating up to 800 passengers.