Boeing Flies High With Chinese Over EU Carbon Cap

For all the trade conflicts going on between China and the US, here's something that goes against the grain.Think of the US being a beneficiary of a trade conflict involving China and some other country.. That is exactly the sort of thing going on here. To be sure, China and the EU have at least as much trade conflict going on as China and the US. However, that this particular PRC-EU spat redounds to the benefit of the US is remarkable.

A few moons ago I discussed the possibilities for the EU initiating a nasty trade row over it extending its carbon emissions regulations to cover aircraft emissions in 2012 [1, 2]. It's certainly true that the airline industry should be covered in an environmental regulation scheme insofar as jetliners obviously have carbon emissions. However, controversy surrounds the EU also including miles incurred by foreign airlines landing in EU airports and not only those within EU airspace. That is, foreign carriers and their home nations claim unjust inclusion over "extraterritorial" grounds. In this regard the world's superpolluters China and America are united to name check a now-defunct airline.

With these regulations coming into effect in 2012 without much attention paid to the foreign dissenters, it may finally be coming to pass that substantial orders for Airbus aircraft by Chinese carriers may be cancelled in favour of those of Boeing. Or at least a senior PRC official hints while Airbus parent company EADS is in limbo over halted deliveries...

China's ambassador to the European Union said it "makes sense" for Chinese airlines to shun Europe's Airbus planes in favor of competing American models from Boeing Co. in response to the EU's new levies on aviation greenhouse emissions. Wu Hailong's comments are among the first by a senior Chinese official linking Beijing's displeasure with the EU's emissions trading system, or ETS, to jetliner sales by the Airbus unit of [EADS].

EADS chief executive Louis Gallois on Thursday said that the Chinese government is withholding final approval on contracts for 45 Airbus jetliners with a catalog value of $12 billion because of ETS. Mr. Wu said that when the EU includes a Chinese airline in the ETS, "it makes sense for them to go to Boeing."

With the PRC becoming an important source of passengers--both businesspersons and tourists--this row is set to run:

Officials in Beijing have not commented officially on Mr. Gallois's statement that China was delaying approval. In China, airplane orders have traditionally required government approval. Mr. Wu in Brussels said that Chinese airplane orders are "largely a commercial decision by the airline, but of course their decision will be influenced by the position of the central government on ETS." 

While environmentalist may commend EU nations on their commitment to the environment, its environmental ministers of course do not necessarily represent the manufacturing constituencies where Airbus models are made and assembled. In this way a smaller but more evenly spread out industry alike agriculture has better representation of its interests in Brussels compared to a larger but more concentrated one alike aeronautics.

Still, if there ever was a trade and environment issue ripe for a WTO Dispute Settlement Mechanism case, it would be this one.