Depending On Which Company Is Asked, It's High Crimes Or Much Ado About Nothing

The World Trade Organization has handed over its final report concerning government subsidies received by Boeing to both the U.S. and European governments. While the report is supposed to be kept confidential, both Boeing and Airbus had immediate statements putting their spin on the document.

Boeing, for its part, said the report backed up its claims that the WTO had rejected nearly all of the allegations made by the EU against the planemaker.

"Today's reports confirm the interim news from last September that the WTO rejected almost all of Europe's claims against the United States, including the vast majority of its R&D claims – except for some $2.6 billion," Boeing said in a statement released to the media. "This represents a sweeping rejection of the EU's claims.

"Nothing in today's reports 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 R&D support).

"The WTO's decisions confirm that European launch aid stands alone as a massive illegal subsidy only available to Airbus, which has seriously harmed Boeing, distorted competition in the aerospace industry for decades, and resulted in the loss of tens of thousands of good-paying U.S. jobs," the statement continued.

"Today's decision will not require any change in policy or practice, or other remedy that comes close to approaching the billions of dollars of launch aid that must be repaid by Airbus or restructured on proven commercial terms. As a result of the June WTO ruling, EU governments and Airbus/EADS must repay or restructure $4 billion in still outstanding illegal launch aid subsidies Airbus received to develop the A380. They must also remedy the adverse effects of the additional $16 billion in other illegal subsidies Airbus received.

"Under the WTO's decisions, Airbus must now compete in the global marketplace without the massive illegal subsidies it has received since its inception and without which, the WTO held, Airbus would be 'a much different, and we believe a much weaker' company than it is today. It will be required to finance airplanes the same way Boeing does – with its own money. Having recently announced it has more than $13 billion dollars of cash on hand, Airbus should have no problem with this new requirement.

"Today'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, everyone must play by the rules and abide by WTO requirements. Playing by the rules, for Airbus/EADS, means withdrawing the still-outstanding A380 prohibited launch aid subsidy and financing the A350 on commercial terms. Airbus should confirm its intention to comply with the WTO's decisions."

Airbus, not unexpectedly, had a very different view of the findings. The European plane maker  contends that the final decision shows Boeing received "massive and illegal government subsidies for many decades," which negatively affected European industry.

According to Airbus, "(T)he final WTO-report to be publicly released in a few weeks can be expected to say:

• Boeing would not have been able to launch the 787 without illegal subsidies.
• Boeing has received at least $5 billion of US taxpayer dollars which has been determined illegal. Quantification of the additional subsides beyond this figure will take place in later stages of this dispute if Boeing chooses to pursue it.
• An additional more than $2 billion in state and local subsidies that Boeing will receive in the future are illegal.
• The effect of the subsidies is significantly larger than the face value of the subsidies in light of their particularly pervasive nature.
• The pervasive subsidies have thoroughly distorted competition within the aviation industry, directly resulting in significant harm to the European aerospace industry.
• The effect of these subsidies will continue in the future, putting Airbus at a significant disadvantage.
• In concluding that Department of Defense (DoD) and NASA funding are illegal subsidies, the WTO decision will require fundamental changes to the US funding mechanisms."

Airbus contends that the WTO decision will also confirm that Washington State and the City of Everett must stop subsidising Boeing. Unless stopped, Airbus says, these subsidies will increase annually through 2024.

"The WTO can be expected to say that the billions in subsidies benefiting Boeing have a significantly greater distortive effect than the Reimbursable Loans to Airbus," the European planemaker's statement continued. "Airbus estimates at least $45 billion as a realistic figure based on identified lost sales to Airbus as a result from the subsidies. Taking the cases together, the WTO will be seen to now have specifically green-lighted the continued use of loans in Europe and commanded Boeing to end its illegal R&D cash support from NASA, DoD and the US taxpayers.

"Airbus applauds the excellent result achieved by the European Commission and the Member States. From today, Boeing can no longer pretend that it doesn't benefit from generous and illegal state subsidies. It has been doing so from the start and it's time to stop the denial," said Rainer Ohler, Airbus' Head of Public Affairs and Communications. "We expect the WTO dispute to carry on for several more years and as in all trade conflicts, a resolution will only be reached through negotiations. The myth that Boeing doesn't receive government aid is over and we hope this sets the tone for balanced and productive negotiations going forward."

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