US Asserts EU Has Given Planemaker An Unfair Helping Hand

The World Trade Organization is expected to rule within a few weeks on a complaint by the US against the European Union, claiming European governments are unfairly subsidizing the development of Airbus products. As the days tick by, the case is being watched not only by the parties directly involved, but by other nations interested in developing their own airliners.

The International Herald-Tribune reports the case is getting even more attention this week, after European governments suggested they will issue loans to help with development costs for the Airbus A350XWB, a competitor to Boeing's 787. Part of the US complaint in the WTO holds that these so-called loans are not required to be repaid, and amount to government grants.

A counter-claim brought by the EU holds that money paid by the US Defense Department to Boeing for development of new military aircraft, tax incentives offered by municipalities hoping to lure Boeing manufacturing plants, and subsidies paid by Japan to parts suppliers are themselves government subsidies, and total $23 billion dollars since 1992. A WTO ruling in that case is expected late this year.

Ted Austell, Boeing's vice president for international policy, says the WTO decisions will set precedent affecting other member nations. China, Japan, Brazil and other countries are all looking to build their own airlines, to reduce reliance on imports as their domestic air travel markets grow.

"With other countries aspiring to build large civil aircraft, these cases are even more important to the future of the industry than they were when they were filed," Austell said.

Analyst Richard Aboulafia, with the Teal Group in Virginia, predicts any ruling by the WTO will still leave wiggle-room for governments to funnel money to aircraft manufacturers. "The WTO only rules on a specific configuration," he said.

While the cases in the WTO are technically disputes between nations, not companies, the body's verdicts in the competing cases are expected to lead to direct settlement negotiations between Boeing and Airbus.

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