European Governments, Airbus Say Findings Rebuke Boeing

ANN Update 9.16.2010 1000 EDT:
Boeing released a statement late Wednesday in response to public reports indicating that the WTO panel examining European Union allegations of U.S. government assistance to Boeing has issued a confidential interim ruling rejecting the vast majority of Europe's claims:

"If today's (Wednesday's) reports are accurate that some $3 billion of the EU's claims were upheld by the WTO, excluding the claims that relate to past programs long ago remedied by Congress, then the ruling amounts to a massive rejection of the EU case and confirms that European launch aid to Airbus stands as the single largest and most flagrant illegal subsidy in the aerospace industry.

"Nothing in (the) public reports on the European case against the U.S. 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 targeted research support).

"Nor are there seemingly any violations requiring remedy approaching the scale of remedy required of Airbus/EADS as a result of the WTO's June ruling that European governments must withdraw and remedy the $4 billion in still outstanding illegal launch aid subsidies that Airbus/EADS received for the development of its A380. Billions must be repaid or restructured on proven commercial terms. And, equally, they must remedy the adverse effects of the other $16 billion in illegal subsidies, too.

"Neither do the public reports suggest that Boeing's traditional market based approach to financing new aircraft development will need to change; a distinct contrast to the requirement that Airbus/EADS abandon its plans for financing development of new models such as the A350 through launch aid subsidies.

"Given the shape of today's opinion, as it has been reported, the WTO findings against the US are likely to require few changes in U.S. policies and practices. One of the two principal matters that the WTO is reported to have cited as inconsistent with its rules was long ago remedied by the Congress: general US export tax policy embodied in FSC/ETI. That was litigated at the WTO and remedied last decade. As to the second principal matter - NASA research - we are heartened to read that, contrary to statements earlier today from European sources, three-quarters of the subsidies at issue were found to be wholly compliant with WTO rules.

"Today's (Wednesday's) ruling underscores our confidence in the WTO processes and dispute-resolution procedures. We applaud the body for its work and continue to look to Airbus/EADS and the EU to recognize that in today's global market, it is essential that everyone play by the rules and abide by the WTO requirements. Playing by the rules, for Airbus/EADS, means withdrawing their still-outstanding A380 prohibited launch aid subsidy and financing the A350 on commercial terms."

 Original Story: The WTO handed its interim findings on complaints about alleged U.S. government subsidies for Boeing to U.S. and European government officials Wednesday. While details will likely be leaked over the next few days, a final official report on the issue is not expected for six months to a year.

The WTO ruled in June that European governments had provided illegal help to Airbus to launch new airplanes, including the A380 super jumbo and the A350 XWB currently in development.

The New York Times indicates that sources who have been briefed on the findings say the WTO agrees that Boeing received some subsidies that are in violation of international trade rules. The EU had maintained that Boeing received "massive subsidies" in their complaint, but those in the know on the U.S. side of the issue say that the subsidies actually found to be unfair represent only a small portion of what the EU had claimed.

European media has quickly reported that the interim ruling is a strong repudiation of Boeing and the U.S. government. EUBusiness reports that the French Transportation Minister said France was the winner in the trade dispute. He said the WTO had found "in favor of the essence of the European Union's complaint." Airbus has reportedly called on Boeing to end the dispute and enter into negotiations for new funding rules.

No matter what the report actually says, it's likely that both sides will spin the story to their advantage and claim a win. While Boeing has not commented since the interim report was released, it issued a preemptive news release early Wednesday saying  "This ruling follows an earlier final WTO ruling by a separate panel in June that unequivocally condemned European assistance to Airbus - notably the product-development subsidies known as launch aid - as illegal and harmful to U.S. aerospace interests.

"We look forward to learning how the WTO has ruled in today's preliminary decision on U.S. practices, none of which have the market-distorting impact of launch aid nor even approach the sheer scale of European subsidy practices.

"In June, the WTO held in a case against the EU that Airbus had received illegal subsidies totaling more than $20 billion in principle. Launch aid, which represented the lion's share of the involved illegal aid (roughly $15 billion), is unique to Airbus, unparalleled within U.S. industry, and - as the WTO has confirmed - harmful to U.S. aerospace interests and the American worker."

The European Union filed DS 353, the formal complaint against alleged U.S. government subsidies to Boeing, in 2006.

FMI: www.wto.org, www.boeing.com, www.airbus.com