Home > Economics - General > Trans-Atlantic plane wars (crosspost from CT)

Trans-Atlantic plane wars (crosspost from CT)

February 5th, 2011

My post on the end of US decline, suggesting that the US now has about the influence that would be expected, given its population, relative to other developed countries, attracted a fair bit of criticism from International Relations specialists. In particular, my suggestion that the EU and US typically bargain on relatively equal terms (as would be expected since they are about equal in size and income) was criticised by Kindred Winecoff with a reprise (see also Phil Arena). We could go on for a long while picking examples to suit one case or the other, but as it happens, I can take my best illustration directly from the news headlines appearing at the same time as my post. The World Trade Organization has completed its report on US subsidies to Boeing, following an earlier report on EU subsidies to Airbus. Although the report is not yet publicly available, both sides have received it, and are leaking/spinning like made, each claiming victory. Reading the competing claims, it seems that the WTO has found that that the US subsidies to Boeing have broken the rules (yay, Europe!), but not by nearly as much as EU subsidies to Airbus (yay, USA!).

In terms of the legal dispute, this looks like a win on points for the US side. But in geopolitical terms, it’s the other way around. Not only has Europe bent the rules more, it’s done so without suffering any real consequences, and to much greater effect than the US.

From a standing start in the 1960s, Airbus has taken the lead over Boeing in the commercial aviation market, while the rest of the once vigorous US commercial aviation industry has been wiped out. And, thanks in part to the launch subsidies against which the WTO has ruled, Airbus not only has the jumbo end of the market to itself with the A380, but has been able to counter Boeing’s successful (at least terms of orders) 787 with its own A350 (running only a couple of years behind the B787). Perhaps the WTO ruling will eventually force Airbus to give back some of the money, but as far as the global aviation market is concerned, the deed is done.

While this is only one example, it’s one that ought to give advocates of the US hyperpower theory a lot of pause. If spending more on the military than the rest of the world combined (the disproportion must surely be even larger in relation to military aviation) can’t preserve a position of dominance (or even leadership) in a closely related sector like commercial aviation, it’s hard to believe that it can be of any significant value in relation to other sectors of the economy.

It’s certainly possible to argue that the kind of industrial policy that produced Airbus is economically inefficient, and that the Europeans would have been better off leaving the field to the US. But this kind of argument applies in spades to anyone who wants to claim indirect benefits from military pre-eminence.

Similarly, it’s still possible that Boeing will win, or at least regain parity, in the marketplace. But if so, it will be due to a combination of good commercial judgement and good luck, not because Boeing has benefited from being part of the US military-industrial hyperpower rather than the supposedly outmatched EU.

Coming back to the general question, I’d say that the outcome of negotations where the EU and US appear with opposed agendas depend mainly on such things as the existence or absence of veto points, and the extent to which one side or the other cares about the outcome. Where there are lots of veto points (climate change negotiations or the Multilateral Agreement on Investment) the status quo has an obvious advantaage. Conversely, even a united EU can’t stop the US from going to war if it wants to, and the US couldn’t stop the International Criminal Court or the Law of the Sea convention. The US can often split the UK and sometimes others off to prevent the emergence of a common EU position, but the veto points within the US system often mean that the US itself can’t act one in any coherent fashion.

All of this is a long way from my original post, which was mainly concerned with convergence in economic performance. But it’s certainly been interesting to engage with the very different way IR specialists view the world. This is the kind of experience that you get from blogs, and much less from official academia.

Posted via email from John’s posterous

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  1. charles
    February 6th, 2011 at 19:34 | #1

    The EU is the first empire created without a war. I suspect the cross subsidies used to attract other nations actually cost less than an good old fashion blood bath.

    The size of the European economy is now larger than the USA and few have noticed (your cross post is an exception).

    I can’t see the US war machine expanding the US empire any time soon, for Europe the problem is how big and how fast.

  2. melanie
    February 6th, 2011 at 20:28 | #2

    There’s a baby elephant in this room somewhere!

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