Examination of Witnesses (Questions 200
- 212)
TUESDAY 24 APRIL 2007
DTI
Q200 Rob Marris: October of this
year?
Mr Scott: Yes, but we think that
is optimistic.
Margaret Hodge: I think that it
will fall into next year.
Mr Scott: The EU case against
the US is less advanced and our anticipation is the WTO will want
to take these things, as the Minister says, in tandem so they
are co-ordinated. That will move things to the right inevitably.
Q201 Rob Marris: Why is the EU case
against Boeing less advanced? These allegations have been floating
around for years about subsidies in respect of aerospace, have
they not?
Margaret Hodge: Absolutely. I
think we are down there because we were trying to settle this
outside the courts and when it became clear that the Americans
wanted to pursue what they saw as unfair subsidy to Airbus our
arguments that both countries in their way support their national
aerospace sectors had to then be pursued formally.
Q202 Chairman: Could I just check
whether the European case against Boeing takes full account of
all the subsidies being paid. We have had very interesting evidence
which is one of the most interesting papers I have seen for a
long time. Professor Lawrence talks about, for example, the tax
break given by the State of Washington to keep manufacturing on
the West Coast of the States and talks about the fact that 35%
of the project is Japanese, the Japanese Government is coughing
up large sums of money for the 787. In fact, Europe does not speak
with one voice because the Italians are also in the game because
they are part of the 787 project and they are giving money to
support the Boeing project too. It really is quite a tangled web
there and we need to be pretty strong in making the case.
Margaret Hodge: The EU is leading
on this.
Q203 Chairman: The Italians are taking
a backseat, are they?
Margaret Hodge: I do not know
what the Italians are doing there.
Q204 Rob Marris: They are going in
the other direction.
Margaret Hodge: The indirect subsidy
from the Japanese is a point well made, and I can only assume,
but cannot confirm, that the EU have these arguments well rehearsed.
No doubt I will look at that evidence you have had and we will
make sure that the Commission get a hold of it too.
Q205 Chairman: Mr Scott, it looks
as though you want to add something?
Mr Scott: We were talking about
the $17 billion and that is just the R&T support mainly from
NASA, but the EU certainly takes account of other forms of support,
such as the State of Kansas support and State of Washington support,
and it is quite a complex case. I am not aware they have taken
the Japanese side into account because, of course, there is a
major tactical question about whether or not you want to involve
another major nation in the WTO.
Q206 Chairman: It is quite important
in terms of the marketability of the 787 because it makes it cheaper
to sell and, therefore, its competition more effective against
Airbus, so the US$1.6 billion which has come from Japan for that
project so it does make the aircraft cheaper. It is material for
Airbus's own prosperity, I would have thought. Anyhow, we will
move finally to much more political questions, Minister. There
is a vacancy going at present because President Chirac has always
described himself as "Airbus's number one salesman",
and he steps down from the post quite soon. "Would you buy
a used aircraft from President Chirac?", someone says! Are
you applying for the job of being Airbus's number one salesman?
The serious point is we have heard criticism that the British
Government has not been as good as the French Government in promoting
Airbus.
Margaret Hodge: I take exception
to that, I think we do promote Airbus, and I do it pretty consistently,
I do it together with my European colleagues. I had the privilege
of having a flight on the A380, going into the cockpit and having
a go at that, which was good fun, and we do all we can, whether
it is at the air shows or supporting Airbus in relation to their
clients. We are a very strong supporter on finance through financial
mechanisms, I think we play our strong role. We do not have the
ownership that the French Government does and that might be the
only area where a little bit of politics is being played with
that issue over the last few months in France.
Chairman: We always felt Concorde was
solely a French project when they had Concorde, I remember RPR
used to use them in their advertising campaign.
Q207 Mr Hoyle: Obviously we are not
going to have Blair 1 flying around the world, but when we lease
aircraft would it not make more sense that the Prime Minister
ought to be leasing Airbus rather than Boeings when he is going
to other countries?
Margaret Hodge: I am sure the
Prime Minister will have regard to the—
Q208 Mr Hoyle: He has not used much
in the past then, because he has used Boeings.
Margaret Hodge: I do not know
where they are on renewing the fleet, where have we got to? It
is in the Department for Transport. I have not seen anything around
it, but I am sure we will have regard to the wider British interests,
as indeed we have done around Government-leased cars now.
Q209 Mr Hoyle: Hopefully, you can
drop a note to all ministerial departments, "Wherever possible,
always lease Airbus rather than Boeing".
Margaret Hodge: I think what you
have seen, in the very satisfactory outcome we have come up with,
is really good cross-Government endeavour and it has paid off.
Q210 Chairman: On another political
question, perhaps a more serious one, there is industrial unrest
in Germany and France about Power8 and the implications for their
workforces, is there any danger of the package of reforms, changes
and work allocations unravelling in the face of that political
pressure that will flow from that unrest?
Margaret Hodge: I find it difficult
to answer that. What I am clear about is that the package I think
is pretty imperative to securing for Airbus that long-term commercial
opportunity to exploit the growing market. I think it is pretty
important that the implementation of Power8 goes ahead. I have
regular meetings with my European counterparts and we are due
to have one at the Paris Air Show soon and no doubt we will be
discussing this, but I think there is a clear shared interest
in securing the long-term commercial viability of EADS and Airbus.
In my view, Power8 has got to go ahead and I think it is a vital
ingredient in developing that long-term sustainability at the
end.
Q211 Chairman: It is difficult to
read the intentions of other governments, but you are acknowledging
that there is a risk in this still.
Margaret Hodge: There is always
a risk when you are pursuing policies that create redundancies
among a large number of people, 10,000 people will lose their
jobs and that is difficult. EADS is operating in difficult territory
where they have to ensure that the strategic importance of their
position in a number of countries is balanced to reflect the different
country interests. I think Power8 was a good piece of work, given
the difficulties that EADS have been through and currently face.
Q212 Chairman: Finally, unless my
colleagues want to come in at the end, can you paint a picture
for us of Airbus's role in the future as far as you see it as
a Government? Because it is really quite a challenging environment
for almost all of British manufacturing, particularly for Airbus.
We have seen a diminution of the British interest in Airbus because
of the state sale, which obviously the likes of Lindsay Hoyle
worry about considerably. We heard Mark Hunter challenging you
about the funding for technology where we are looking forward
to a further exchange about that, but we do know we are up against
this huge competitive pressure from Boeing who have the great
legacy of the NASA R&T support with their current commercial
development of commercial airliners. We see other countries around
the world who are talking about moving into the sector, China
is announcing an intention of seeking to move into civil aerospace,
it is a pretty difficult old world out there. Have we really made
the breakthrough, a cheap carbon composite technology looking
for a bright new future, or are we still facing some very real
challenges and perhaps even delaying some very difficult decisions
that might come later as a result of all those pressures?
Margaret Hodge: We are facing
enormous challenges, of course that is true, and the growing position
of the Asian sub-continent with both China and India creates yet
new challenges to the European aerospace industry. Here in the
UK we now have an opportunity with the settlement that we have
had around civil aviation and our agreement with EADS to assure
ourselves of a strong position in the world and that means that
we have got to have proper investment in R&T, both government
and the industry, and I see that as a massive priority. We have
to ensure that we maintain our expertise and that is the investment
in skills and people which we must make sure that we pursue with
vigour, there is a lot of work to be done there. We have got to
ensure a business environment which enables the aerospace sector
to really exploit the massive opportunities that come out of globalisation.
I think both the macro-economic stability and the regulatory environment
which we have established are appropriate but we have got to keep
driving. We have to keep our foot on the accelerator very firmly
if we are to really take advantage of this opportunity that we
have succeeded in achieving.
Chairman: From my own perspective, Minister,
I would say how important I think it is for the Department for
Commerce, the Department for Business and the Department for Trade
and Industry to ensure that we do keep up the pace of what is
a very challenging international environment. If my colleagues
have no further questions, I would like to thank you very much
indeed for the time you have given us. I apologise again for keeping
you waiting at the beginning. We look forward to the additional
written information that we discussed on the Department's initiatives.
Thank you very much, indeed.
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