Airbus declares victory in WTO spat

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Airbus has claimed a resounding victory over Boeing in the latest ruling from the World Trade Organisation on a pair of disputes which have each side alleging that their respective governments are funneling illegal subsidies to their airframers.

Among Airbus's claims are that the WTO ruling shows that Boeing would not have been able to launch the 787 without illegal subsidies, and that illegal research and development cash support from NASA, the US Department of Defense and US taxpayers has cost Airbus at least $45 billion in lost sales.

This round of the transatlantic dispute, which dates to 2004, comes six months after a ruling on the US complaint had Boeing declaring that some $20 billion of European launch aid subsidies to the Airbus A380 had been deemed "illegal and damaging".

Details of the WTO's rulings remain confidential to the two sides - technically the European Union and the United States government. Rulings in the US case versus Europe, DS316, are under appeal by both sides and thus still under wraps. The final ruling on Europe's case versus the United States, DS353, could in principle be made public in several weeks following translation, though a round of appeals is all but certain.

 

The United States alleges that European governments and the European Union illegally support Airbus by lending it money at below-commercial rates, and also by developing, at public expense, infrastructure critical to carrying out projects like the A380.

Europe's claim against the United States alleges that Boeing R&D is subsidized by government research projects Boeing is paid to carry out, and also by state and local government support in the form of tax and rent cuts.

According to Airbus, the WTO's ruling on its case, against what it describes as "pervasive subsidies" shows Boeing to have illegally received at least $5 billion of US tax money, with another $2 billion in illegal state and local subsidies set to come from Washington state and the city of Everett in the future.

And, says Airbus: "The WTO can be expected to say that the billions in subsidies benefiting Boeing have a significantly greater distortive effect than the Reimbursable Loans to Airbus.

"Airbus estimates at least $45 billion as a realistic figure based on identified lost sales to Airbus as a result from the subsidies. Taking the cases together, the WTO will be seen to now have specifically green-lighted the continued use of loans in Europe and commanded Boeing to end its illegal R&D cash support from NASA, DoD and the US taxpayers.

"From today, Boeing can no longer pretend that it doesn't benefit from generous and illegal state subsidies."

An Airbus spokesman adds: "We expect the WTO dispute to carry on for several more years and as in all trade conflicts, a resolution will only be reached through negotiations. The myth that Boeing doesn't receive government aid is over and we hope this sets the tone for balanced and productive negotiations going forward."

Boeing vice president for International communications Charlie Miller dismisses Airbus's $45 million damage claims as "ridiculous", with an actually level of illegal aid to the American airframer being only $2.6 billion. The dispute, he says, "is all about the 40 years of illegal launch aid to Airbus", adding that while the final outcome of both cases may see Boeing have to forego some small R&D support, "Airbus will have to change its business model".

A Boeing statement adds: "Nothing in today's reports even begins to compare to the $20 billion in illegal subsidies that the WTO found last June that Airbus/EADS has received (comprised of $15 billion in launch aid, $2.2 billion in equity infusions, $1.7 billion in infrastructure, and roughly $1.5 billion in R&D support).

"The WTO's decisions confirm that European launch aid stands alone as a massive illegal subsidy only available to Airbus, which has seriously harmed Boeing, distorted competition in the aerospace industry for decades, and resulted in the loss of tens of thousands of good-paying US jobs."

For its part, Europe has long contended that the way out of this dispute is a negotiated settlement, perhaps a modern version of the Aircraft Sector Understanding that had set a framework for national support of aerospace activity before it was left behind by the current, acrimonious state of transatlantic relations. And, according to one source close to Europe's case, unless Boeing agrees to leave the courts behind and move towards a negotiated settlement, the lawyers can keep these two cases going essentially forever.

According to international trade law expert Ian Giles of London attorneys Norton Rose, WTO-level action invariably involves as much politics as law: "The details of today's ruling are unlikely to clarify the muddy picture surrounding the question of subsidies to Airbus and Boeing.

"The ultimate likely outcome to this long dispute remains a negotiated settlement. This is unsatisfactory on a number of levels as it leaves a lack of clarity as to what subsidies are permitted under WTO rules, and it leaves the ability of the WTO to effectively resolve these disputes open to question.

"The saga could continue for some time."