WTO Clout in Question as Boeing, Airbus Claim Victory in Trade War

 - April 9, 2010, 6:22 AM
The recent ruling on government subsidies to Airbus did not address European loans proffered for the A350XWB. (copyright Airbus)

The World Trade Organization finally passed judgment last month on the legitimacy of $178 billion (2006 $) in European loans to Airbus for six separate aircraft programs. But after a six-year wait, it remains unclear when or to what extent the ruling will actually influence anyone’s behavior. In fact, the confidential judgment did not address loans to Airbus for the A350XWB, the program that appears capable of affecting Boeing’s future prospects more than any other. Of course, the U.S. could lodge a new complaint specific to the A350, but what such a move would ultimately accomplish looks less and less clear. Both sides seem ready to declare some measure of victory regardless of the substance of any ruling, while appeals will likely prolong the dispute for many years to come.

In a statement issued by Boeing the day after the WTO sent its confidential report to the parties involved, the company cited quotes by “officials” that “the United States has prevailed on all the major issues in the WTO’s final decision.”

“This is a powerful, landmark judgment and good news for aerospace workers across America who for decades had to compete with a heavily subsidized Airbus,” said Boeing in its statement. “Government subsidies have been used to support the creation of every Airbus product, including the A330/A340, which received more than $5 billion in development aid, and the A380, which received $4 billion in subsidies. 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.”

Conversely, Airbus said that the WTO had rejected “70 percent of the U.S. claims,” that it confirmed as a legal and compliant instrument of partnership between government and industry the European mechanism for issuing reimburseable loans and that the panel deemed U.S. requests for remedies legally inappropriate.

Although Airbus did concede that past loans did contain “a certain element of subsidy,” it asserted that the panel rejected U.S. claims that European measures caused job losses or lost profits in the U.S. aircraft industry. It also stressed that the report would not effect future funding “in any way” for the A350 and that the body specifically rejected U.S. attempts to include the A350 in its complaint.

Assistant U.S. trade representative Carol Guthrie told AIN, however, that the dispute directly addresses only subsidies the U.S. identified in its panel request in 2005. “Therefore one would not expect the commitments of launch aid to the A350 announced last summer and in recent days to be addressed explicitly in the final report, which remains confidential in any case,” she said. “Certainly reasoning and conclusions in the final report could be expected to be relevant to the WTO-consistency of launch aid for the A350.”

Airbus, for its part, said it expects the WTO conflict to carry on for “at least a few more years. “As in all other trade conflicts, resolution will finally be found only in transatlantic negotiations,” it said. “Boeing’s repeated rejection of European offers for negotiation over years and again last night [March 22] usurp the proper role of the U.S. government and contradict the U.S. transatlantic partnership with European nations.”

Airbus said it expects the WTO to issue a separate report on Boeing subsidies in June. “Boeing’s recent WTO enthusiasm is unlikely to survive WTO confirmation that the 787 is the most highly subsidized aircraft program in the history of aviation,” said Airbus in its statement.