Posted by: Tim Lincoln | March 24, 2010

WTO Rules on Airbus Subsidy Case

Yesterday, the WTO ruled on the dispute that Boeing brought against Airbus in 2004 regarding Airbus having received illegal subsidies. Predictably, both Boeing and Airbus wasted no time trumpeting success in the final result. Unfortunately, the final report will not be released to the public for another few months. Until then, all we will have to go on will be statements from PR personnel on both sides of the dispute. Since such statements will be arguably biased, they must be taken with a fairly large grain of salt.

Both Boeing and US lawmakers have stated that they are pleased that the WTO has ruled in favor of their accusation that Airbus received illegal subsidies while developing their products. Boeing states:

Government subsidies have been used to support the creation of every Airbus product… Those and other European government subsidies to Airbus have significantly distorted the global market for large commercial airplanes, causing adverse effect to Boeing and costing America tens of thousands of high-tech jobs.

US Representative Norm Dicks (D-WA), whose state houses most of Boeing’s manufacturing facilities, said This independent panel has concluded that Airbus could not have achieved the growth of market share – harming U.S. workers – without its pattern of illegal assistance.

On the other hand, Airbus has said that the WTO has rejected 70% of the claims presented by the US. They also state that the WTO ruled that the loans Airbus has used to fund development of their aircraft are legal, though past loans may have contained some elements of subsidies. There is also an assertion that research grants are not in compliance with international law, which does not bode well for the ongoing WTO case that Airbus brought against Boeing. Airbus also fires back at Boeing by saying:

Neither European RLI nor any other measure has caused “material injury” to any US interest. This means that the Panel has rejected the US claims that European measure caused job losses or lost profits in the US aircraft industry. Boeing claims of lost US jobs have now been judged and found to be false.

They also state Boeing’s recent WTO enthusiasm is unlikely to survive WTO confirmation that the B787 is the most highly subsidized aircraft program in the history of aviation.

Why can’t we all just get along? This constant bickering between Airbus and Boeing, and by extension between US and European politicians, has become extremely tiresome. Yes, fair competition is a good thing, but surely negotiation would be more productive than WTO dispute cases. Airbus even stated:

Airbus expects the WTO conflict to drag along for at least a few more years. As in all other trade conflicts, resolution will finally only be found in trans-Atlantic negotiations. Boeing’s repeated rejection of European offers for negotiation over years and again last night usurp the proper role of the US Government and contradict the US trans-Atlantic partnership with European nations.

In the meantime, China and Russia are developing new aircraft that will be aimed squarely at the bottom of the market that Airbus and Boeing have enjoyed to themselves for the past few years. China already has plans to aim higher as well. Brazilian and Canadian aircraft will also soon begin to nibble at the bottom of the narrow body market that has been the bread-winner for both Airbus and Boeing. Will this internecine legal bickering between Airbus and Boeing end up hurting them in the long run? I think that may be a very real possibility.

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