For years the European Union has subsidized Airbus, the France based aircraft manufacturer. Despite cost overruns, production delays and contract cancellations, EU subsidies to the tune of over $100 billion have kept Airbus viable. Finally the American government is responding to these unlawful subsidies.

This week the Bush Administration initiated filings before the WTO arguing that these subsidies will

“continue to hurt the American plane manufacturer.”

The essence of the most recent claim against the EU is that using a sophisticated financing scheme, Airbus is given loans from EU member governments at below market rates enabling

“Airbus to launch a series of large civil aircraft models at a scale and pace that would have been impossible without subsidies.”

Naturally, the EU says that there no evidence showing that these subsidies have any negative impact on American manufacturers.

“It argues that the money is legal because it is repaid as Airbus sells aircraft. But EU officials acknowledge that if sales of new planes, such as the troubled A380 superjumbo, fail to meet forecasts - as is possible given severe production setbacks - the loan terms could benefit the company.”

A truly competitive aircraft market for American companies and workers means enforcing the rules, even with our friends, and in this case, it looks like we may be willing to do that.

An interesting story in The Washington Post a few days ago focuses on the Midwest and a couple of factors - manufacturing job loss and high mortgage foreclosure rates - which have created an ongoing perfect storm when it comes to the region’s economy.

“While lax lending policies have been blamed for the unfolding home-mortgage crisis across the country, the distress in the Midwest has been exacerbated by fundamental problems with the economy. The region has been devastated by a severe drop in manufacturing jobs as the U.S. automobile industry shrinks.”

With home prices under pressure, the Post notes that:

“How far (home prices) fall will be determined in large measure by the strength of the economy…since job and income growth ultimately determine how much people can pay for housing.”

Not good news, given that three Midwestern states already ranked in the top 10 for highest foreclosure rates – Indiana, Michigan and Ohio – were also the only states in the country to record job losses over the last year (Feb 2006-Feb 2007) according Friday’s BLS regional and state job employment summary.