WTO: $20 billion in Airbus aid was illegal

Airbus has received $20 billion in government loans that were in fact illegal subsidies, and used that money to develop its A300, A320, A330, A340 and A380 jets, the World Trade Organization has ruled.

The appeals panel also found a long list of other specific instances when European governments provided direct and illegal aid to Airbus. However, it ruled against the United States on a few specific points – which Airbus supporters in Europe were quick to seize upon.

The 1,061-page ruling is considered by many on this side of the Atlantic to be a win for Boeing and the United States, in that it upheld their main contention that the launch aid Airbus receives from European governments – low-interest loans that don’t always have to be paid back – violates free trade agreements.

But the practical impact of the ruling is still not clear. The European Union has filed a countersuit against the United States, saying that Boeing too receives improper government help.

And even within the 1,061-page document released on June 30, there is plenty of wiggle room, The New York Times reported. “The report is so complicated that few reporters, politicians or even company executives will ever get through all of it — let alone understand it.”

For its part, Boeing quickly put out a statement calling the ruling a “sweeping legal victory,” and called on Airbus to immediately to immediately repay $4 billion in loans it received to develop the A380 and to drop plans to take European government money to develop its proposed A350.

The A350 was not included in the original U.S. complaint, because it has not yet been granted any government aid.

“The (WTO) said that without the illegal subsidies it received, Airbus would not have the aerospace market share it now enjoys,” said Boeing’s top lawyer, Executive Vice President J. Michael Luttig. “This ruling will alter the competitive landscape in the aerospace industry forever, forcing Airbus to compete in the marketplace on the same terms as Boeing.”

On the other hand, the European Union put out a statement highlighting that the WTO had ruled that the money it had poured into Airbus “did not damage Boeing’s pricing or profitability, and did not lead to a loss of jobs at the company.”

And the government of France took the position that the ruling “confirmed that it is perfectly acceptable” for European governments to continue giving Airbus interest-free loans to develop new aircraft. “France has no intention of giving up this instrument,” France’s Transportation Ministry said.
Washington’s Congressional delegation quickly tied the decision to the ongoing dispute over the U.S. Air Force’s tanker contract.

“Today’s announcement validates what we have been saying for quite some time,” said U.S. Rep. Jay Inslee. “Massive illegal subsidies to Airbus have distorted the market and given Airbus an unfair advantage that is costing American jobs.”

“Now that the WTO ruling is out in the open, the Department of Defense needs to consider the impact of these illegal subsidies on the tanker competition,” added U.S. Rep. Rick Larsen. “A fair, open and transparent competition means taking into account the fact that the A330 benefited from billions in illegal subsidies.”

Both the United State and European Union have 60 days to lodge appeals to this decision, and a decision on Europe’s counter-suit challenging U.S. subsidies to Boeing is due in July.

At this point, it seems like that “this whole case will go on for years,” an Airbus spokeswoman said.

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