It's hard to deny that Boeing
The robust plane sales are indeed a positive sign, but Boeing shareholders should be aware that new risks are emerging as the trade battle between Boeing and Airbus intensifies. I've written before that both Boeing and Airbus would be better off if the U.S. and Europe negotiated a settlement outside the World Trade Organization, but however the dispute gets resolved, Boeing's competitive position is unlikely to change. In the near term, the WTO battle is largely inconsequential; it could take years to run its course.
But the U.S.'s and Europe's decision to pursue the nuclear option with WTO countersuits could create a long-term problem if both parties decide to let the international body rule on the cases. Boeing has a legitimate beef with Airbus' government-sponsored launch aid, but Boeing has struck back by wrangling incentives out of state governments in the U.S. and national governments abroad. Consequently, the WTO is likely to rule that both firms should untangle themselves from various subsidies.
The U.S. and Europe seem so convinced of their own positions, though, that they may not be willing to force Boeing and Airbus to actually comply with WTO decisions. This could be a major problem. Two of the world's largest trading entities flouting a WTO ruling would be tantamount to declaring open season on fair trade practices. As a result, there would be nothing to stop Airbus from getting more subsidies, which would doubtlessly prompt Boeing to try to respond in kind. Airbus has the advantage in a subsidy battle; it can count on government help, while Boeing lacks the same assurances. For Boeing shareholders, WTO rulings could be bad news.
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Fool contributor Brian Gorman is a freelance writer in Chicago. He does not own shares of any companies mentioned in this article.
