The headlines are again screaming of trade wars. The EU and the US, it appears, are about to come to blows - this time over the $15.5 billion acquisition of McDonnell Douglas Corp by Boeing. Only a few months ago it was Helms-Burton with the US accused of using extraterritorial legislation. Now the boot is on the other foot.
Under the long reach of the Helms-Burton legislation Washington could seize the assets in the US of international companies which continued to trade with Cuba in breach of US policy. This applied even if that trade had no connection whatever with the US. Businessmen were denied visas to visit the US, and the EU went as far as preparing its own legislation to meet seizure with seizure.
A complaint was lodged with the World Trade Organisation and the hearings were only blocked because President Clinton used presidential powers to temporarily suspend the implementation of the Act. He will probably have to do it again, as Congress seems to be in no mood to repeal the legislation.
Then there was the matter of chickens - a mutual agreement on a wide range of product health and safety provisions held up because the EU did not approve of the US practice of sterilising chickens by washing them in mildly chlorinated water. The EU banned the imports of US chickens and saw Danish and Irish bacon exports to the US blocked in retaliation.
Now it is the US authorities who are complaining about the extra-territorial reach of the Competition Commissioner, Karel van Miert. What business has the EU in vetting a US merger, Washington complains?
Every right, says Willy Helin, Van Miert's harassed spokesman. The merger is a global issue giving Boeing three-quarters of the market for large passenger aircraft worth many billions of dollars. EU legislation allows the Commission the right to vet any merger which threatens to impact directly on the EU market, just as US legislation gives them the reciprocal right. In that sense, the Commission argues, it is not extraterritorial.
The Commission cannot halt the merger, which was approved two weeks ago by the Federal Trade Commission and the Defence Department. But it can fine Boeing very substantially and penalise companies that do business with it.
On Tuesday the Commission unanimously endorsed Van Miert's position rejecting the merger in its current form, and he was then backed on Wednesday by a group of national anti-monopoly experts from the 15 member-states. President Chirac also added his weight to the argument, strongly supporting the Commission and warning that the merger "could be very dangerous for Europeans".
If the EU confirms its blocking action at next Wednesday's Commission meeting, the US has already threatened to retaliate, a move which could hit Airbus sales to the US or those of the hundreds of European companies which supply Boeing.
"If they're going to take action against Boeing that's a very serious matter," says Congressman Norm Dicks, whose constituency includes the Seattle HQ of Boeing. "The American people are not going to stand for the EU blocking a merger between two US companies."
Boeing is saying nothing about its talks with the Commission, beyond expressing confidence that a deal will be done.
The Commission has expressed reservations about three specific aspects of the merger:
Boeing has 20-year exclusive deals with the US airlines Delta, Continental, and American, effectively freezing competition out of a large part of the market;
McDonnell Douglas has much technological expertise from its military production, which may have been acquired through state-funded research - passing that on to Boeing is seen as an unfair subsidy;
the Douglas Aircraft subsidiary of McDonnell, although currently producing little new for the market, has a substantial share of the fleet in service, thus reinforcing Boeing's dominance and leading to fears that the company could abuse its position as a spare parts producer.
The result may well be that Boeing is forced to divest itself of some of its functions or to subcontract out spare-part production. But if agreement with the Commission is not reached things could get very nasty indeed.
