SinoDefence Forum

Mr T

It would be proportionate to kick Boeing out of China for selling a dozen Harpoons?

As far as I understand it ownership doesn't decide whether WTO regulations apply or not. If you can show me instances of where the WTO decided a country was not in breach of the regs simply because the domestic companies in question were majority State owned, I'm happy to stand corrected.

solarz

No, I'm saying "punishing Boeing a bit but not too much" is a perfectly fine and sensible response.


That's not the issue. Every organization has the right to choose which suppliers to buy from. The WTO only says that governments can't pass laws which harm fair competition. However, when the government has a beef against a particular company, it's perfectly legit for government owned companies to decide not to buy from that particular company.

Geographer

Those who mentioned how silly China would be to drop Boeing airplane sales over $32 million of Harpoons are missing the point...that won't happen. Boeing would rationally choose to preserve their far larger aviation market in China over their missile market in Taiwan.

I'm sure China has internally debated this strategy for a decade, now they are beginning to implement it. Basically China could force companies to choose between China or Taiwan (I know they are one in the same nation ultimately but for the time being). Almost every country does significantly more business with China so they will choose China, severely hurting Taiwan.

As others have noted, China is unlikely to sanction Boeing strongly, just buy 20 Airbus planes and then go back to normal. But even 20 A320s is worth ~$1 billion. China has been masters of subverting trade policy subtlety, so if they wanted to hurt Boeing prospects for winning orders they could effect policy through back channels. As I mentioned before, Chinese airlines depend on government bank financing to purchase planes. That financing might dry up all of a sudden. This might be legal under WTO rules, and even if it isn't, a case against China would take years and be hard to prove.

The bottom line for any rational business eager to participate in China's market is not to offend Beijing too much. Selling arms to Taiwan is akin to China selling arms to Puerto Rican separatists or worse. Beijing and the Chinese take it that seriously.

AssassinsMace

First China should stop buying US bonds. To really sound the alarm bells over nothing... give an export name to the ASBM.

Dolcevita

There is more ways to apply sanctions directly or indirectly without hurting Chinese interest.
Lockheed, Sikorsky and Boeing as well as others have been given notice and it is up to them to dare China at their own peril. Other than direct sanctions, China is also increasingly a source of international and commercial financing which it can use as a additional tool.

Engineer

This statement sounds like a load of sour grapes to me.

It doesn't matter if Airbus gains temporary advantage. The bottom line is that Boeing will lose money if it goes ahead with the sale of Harpoon missiles. Moreover, China doesn't need to stop purchase of Boeing aircraft. All China needs to do is to buy 20 extra A320s. Given the fact that there is an A320 assembly line in Tianjin, China doesn't really lose much.

Mr T

If a government gives an order so that Boeing planes aren't bought, whether through law or shareholder control, the effect is the same. I doubt the WTO cares about such technicalities.

You do know the meaning of "sour grapes", right? Last time I checked the UK was in Europe and we did work for Airbus. So please explain how it's a case of sour grapes.

As this is through the FMS there's little Boeing can do to stop the deal even if it wanted to. And if all that happens is that a handful more Airbuses are bought Boeing might decide company independence, versus dancing to China's tune, is worth it. Google took a similar position.

SampanViking

I think others have mentioned the likely course of how sanctions will be applied. I notice though that the banks still think they will be in the firing line.

While Boeing may decide to bow out of its own accord, I think the thrust of Chinese sanctions will be to use "Pork Barrel" connections, to target the interest of Senators Directly.

It will be interesting to see if the bill is voted down once the Great and the Good realise that its their pockets in the cross hairs.

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Engineer

lol! Law is all about technicalities, and when one has plenty of money to hire lawyers, then one can argue technicalities all day.

Of course I know the meaning of "sour grapes", and if you want an example, simply go back to your previous statement.

At the end of the day, there is nothing you can do about the would-be sanction, and the bottom-line is still this: Boeing will lose money should the sanction go through.

And Google still hasn't exited China yet, so that's pretty much failed. Sure, Boeing theoretically could stop doing business with China, but the reality is it couldn't.

Mr T

*SIGH*

Just because a lawyer will seek to rely on a technicality doesn't mean it will work. Indeed if China's only defence will be the technicality that it didn't officially ban the airlines from buying from Boeing just gave them an order through its business control, it will have already conceded that it was effectively banning the airlines. That's the legal equivalent of shooting yourself in the foot.

Sour grapes is where someone says they don't want something because it's "sour". I'm all for China buying exclusively from Airbus because it's good for us. So it's not sour grapes, it's the reverse.

Oh noes, Boeing will lose money - the end of the world is nigh!

We'll see what happens, but given Boeing stands to get a nice slice of the $2.5 billion from the Apaches notified in 2008 I doubt it's that worried about China ordering a couple more Airbuses.

You've missed the entire point. I didn't say anything about deliberately not doing business with China, I talked about asserting corporate independence. Google did that by giving the Chinese government a big slap in the face.

Boeing won't react in the same way, but it may well decide that continuing arms sales to Taiwan that have been authorised by Washington are in its interests. If it did stop selling weapons to Taiwan indefinitely it would face a lot of hostility from Congress, who I might add hold the purse-strings in regards to its business with the US military.

Certainly in the years prior to 2008 there was discussion that Boeing was dragging its heels over the Apaches because of all the potential sales to China. Yet it gave the pricing data it had to. So either you're suggesting that it was arrogant and thought that there would be no consequence at all, or (the more likely scenario) it decided that any reaction from China would not severely hurt its business and, having considered the pluses of continuing the arms sales, that it would be better to sell the helos.

Mr T

China threatens US sanctions over arms sale

Yeah, order Congress around - that'll work!

That's some big talk, Mr Yang. But what if they still don't play ball after you've put these sanctions in place?

Engineer

Lawyers seek to rely on technicality because law is all about technicality. You are right that it doesn't always work, as it all depends on the amount of money you have. With money, you can hire lawyers to use those technicalities to your advantage. Without money, those technicalities will be used against you.

Concede would imply guilt, and in this case there isn't any. This isn't a protectionist scheme for domestic industries.

Yeah, like being all soured over China's power to enact on its would-be sanctions, and comforting yourself that the power is no good anyway because of this and that.

Again, who cares about Airbus? Boeing will lose money, and that will be the purpose of the would-be sanctions.

Should Boeing sell Apaches too, it is going to get an even bigger would-be sanction than an extra 20 A320s, plain and simple. There is only so much R.O.C. can do to compensate for Boeing's lost, and it is always less than what China can make Boeing lost. Potentially, if Boeing doesn't go ahead with the sell, it might receive another 20 orders of 737s from China. Here, China can always compensate for what Boeing lost from R.O.C.

Oh yes, Google gave quite a big slap by talking loud about leaving China and then sulking and keeping quiet and staying in China afterward.

Really? What happened to all the grand lecture about corporate independence?

What you have talked about is a two-way street. Certainly, the Congress with disregard of corporate independence can pressure Boeing to go ahead with the sell, but the Congress will face hostility from companies as well because of the sanction. As other posters have pointed out, one of the ideas behind the sanction is that the senators and congressmen will have to decide whether it is more important to poke China with a stick for entertainment or keeping their seat and interests.

Both scenarios are the same thing, but you are right on both accounts. Boeing probably thought China response would merely be freezing military exchanges with the US.

FriedRiceNSpice

Don't be naive. All the Chinese has to say is that their airlines found it to be more sound from a business perspective to purchase from companies other than Boeing. In fact, they don't even have to give any specific reason. Burden of proof is not upon the Chinese.

Mr T

You've made some stereotypical comments about the law. In reality things aren't like that.

1. Given that the US would spend just as much money on legal representation if it argued a case in front of the WTO, even if you were right that money spent on lawyers = chances of success, China would have no advantage.

2. The law is a lot more than technicality. A legal technicality is normally something that completely flies in the face of the spirit of the law/regulations but nonetheless could be considered a valid justification/permits the activity in question. To try to rely on a mere technicality is to say "yes I did do it, but I've got a get-out-of-jail-free-card" - nyanyanyanyanya!" Judges are frequently unimpressed by that line of argument and will look towards what the intended effect of the law/regs was.

I would say that is what the WTO would do as well. So unless you believe that the WTO wouldn't want China to overtly stop its airlines doing business with Boeing, but that it would accept China to do it through shareholder control (which makes absolutely no sense whatsoever), relying on a technicality is unlikely to work.

You don't have to be protecting domestic industry to be in violation of WTO rules - they go wider than that. That's why China would potentially be "guilty".

*SIGH*

That is not sour grapes. Sour grapes is the idea that you want something (grapes) but can't get it, so you say you don't want it (because they're sour). I don't want sanctions on any companies because of arms sales to Taiwan, so it isn't sour grapes.

Hopefully you won't use that phrase incorrectly again.

I thought the point of the sanctions was to force American companies to stop selling weapons to Taiwan, not to throw a temper-tantrum.

So why didn't China do something in 2008? It doesn't make sense to inflict pain now over a much smaller deal.

But as I tried to explain, as far as I understand it there's nothing Boeing can do to stop the sale now. Unless the White House were to stop issuing contracts, Boeing has to comply because it will be doing business with the US government even if the helicopters were being produced for Taiwan.

No, Google gave the Chinese government a slap by indicating that it wasn't willing to continue doing business in China on the current terms in public and causing a big fuss. It didn't say that it was pulling out of China with immediate effect. Even if Google subsequently stopped complaining, it still slapped the Politburo. That's what a slap is, it's something that's short and sharp.

You introduced this idea that Boeing will do whatever a big supplier orders it to do, so I was applying your own logic to the situation.

You can't accuse Congress of disregarding Boeing's corporate independence whilst justifying the Chinese government interfering by threatening it. Boeing is obliged to comply with the order given that this is part of the FMS procedure. If it walked out of the process it would cause chaos and uncertainty for other sales to the world (as everyone would think they could reap rewards by threatening to boycott buying Boeing et al goods if they sold arms to regional competitors), so of course Congress would be outraged.

Yes, more stereotyping - this time that everyone in Congress can be bought and that China will cause economic chaos in the US by flexing its little finger.

1. Which congressmen/women and senators are from areas that are very much reliant on jobs from US defence companies that also have large sales to China, whilst only small sales to Taiwan, and therefore could really be hurt by Chinese sanctions? Strangely enough the US defence industry does not support every state/district's economy and not all parts of the US defence industry that sell weapons to Taiwan benefit far more from business in China. Lockheed Martin is a good example.

2. Why are you so sure that those politicians would not be outraged by obvious Chinese hostility and not adopt a defiant position, whipping up support from their constituents along patriotic terms?

3. What do you think the opponents of those politicians would say if those politicians did cave in and tried to block the sales? Given China is not seen positively in the US it would be political suicide.

The more pressure China put on US companies the bigger the risk that it would cause a significant trade war/conflict and/or anger Congress. If China played it safe so there was little harm caused, Congress wouldn't notice.

Engineer

It's not like the US have much advantage either, so it would most likely come to a stalemate -- that is both sides have to give. Another thing, if US would actually spend more money arguing a case infront of WTO than the money they are getting from arms sales, then that basically says that the sanction from China hurts pretty badly and not just an itch.

I will believe your words regarding technicality when lawyers stop using it. Anyway, saying "yes I did do it" is basically pleading guilty, and singing "nyanyanyanyanya" is rubbing the judge in the face. We will of course not expect China to admit guilt where it hasn't committed any.

Expecting WTO to blindly rule against China because it is China is fantasy. The reality is that China wouldn't put down the sanction-card if there is going to be a huge repercussion. So, I would not worry to much for China if I were you.


So how wide? WTO rules are not unlimited in scopes, unless you are implying that the West has some sort of privileges to allow whatever it says to automatically become the rule.


The idea of sour grapes is that you call something bad because you can't have it, in this case is the lack of power to do anything about China's would-be sanction. Of course, I wouldn't expect you to admit it, so keep on denying it if it pleases you.

When the sales go ahead despite warning, then obviously some spanking is in order.

20 years ago, all China could do was complain on their press conference because they couldn't do much else. In recent arms sales, all China could do were complain and froze military exchanges with the US because there was not much else Beijing could do. They only use the sanction-card now because, quite obviously, it wasn't available before.

That problem is for Boeing to figure out. Perhaps it would serve as a good lesson for Boeing not to destabilize regional military balance around China in the future.

LOL! You call that a slap? Seriously, that sounded more like Google threw a fit and got put in its place.

I never believe that corporate independence exists in the first place, but you obviously do because you brought up this idea. However, it doesn't work well for you when you try to justify Congress's disregard for corporate independence while at the same time claiming that corporate independence would somehow work effectively against China.

If only it is that easy in reality! Then this arms sale issue wouldn't come up at all!

To be frank, even if China actually goes ahead with the sanctions, I would still call it weak. However, it is still progress nonetheless. I look forward to the day when China can overtly sell defensive weapons to Iran as a response.

Of course those politicians who have absolutely no ties with the companies under sanction would theoretically not need to worry about the sanction at all. However, the political party in which they are in might have something to say.

Do these same politicians expect their hostility toward China to be embraced with open arms in Beijing? Give me a break!

So their hands are tied and would have their interests affected from the sanctions.

Today is different from 10 years ago, namely China national strength has increased dramatically. While it is far from enough to snub the US directly, it is enough that the US should play it safe and know when to stop before both sides end up being losers.