Each Says The Other Benefited From Illegal Subsidies
The official release of the World Trade Organization ruling
concerning alleged illegal subsidies to the world's two largest
planemakers seems to have done little to
clarify the situation, as both Boeing and Airbus claim the ruling
supports their position.
In a news release, Boeing said that the ruling exposes massive
airbus advantage from illegal subsidies. Boeing claims that the
findings show Airbus received more than $20 billion in
impermissible funding versus $2.7 billion for Boeing, and that the
trade court rejected nearly 80% of EU claim of improper support for
Boeing; finds no U.S. equivalent for billions in illegal European
launch aid provided to Airbus.
Boeing has reiterated its call for Airbus to fund the A350 and
other new programs on commercial terms, and remedy prohibited
export subsidies on the A380. They say the ruling confirms the
massive market advantage Airbus has enjoyed from billions in
illegal government subsidies provided to fund the company's
commercial airplane product line since its inception more than 40
years ago.
"This WTO ruling shatters the convenient myth that European
governments must illegally subsidize Airbus to counter U.S.
government assistance to Boeing," said J. Michael Luttig, Boeing
executive vice president and general counsel. "The ruling rejects
80 percent of the EU's claims against the U.S., finding no more
than $2.7 billion of impermissible subsidies to Boeing not
previously remedied. That amount includes $2.6 billion in NASA
R&D funding, which is but a small fraction of the total amount
challenged," Luttig said.
Today's ruling resulted from the European Union's attempt to
counter a U.S. case that successfully challenged illegal subsidies
to Airbus. Last June, the WTO upheld approximately 80% of the U.S.
claim, finding Airbus had received more than $20 billion in illegal
government subsidies, which harmed the U.S. aerospace industry and
resulted in the loss of billions in exports and tens of thousands
of U.S. jobs.
Boeing says the WTO report confirms illegal government subsidies
to Airbus included:
- $1.5 billion in R&D subsidies,
- $1.7 billion in infrastructure subsidies,
- $2.2 billion in equity infusions, and
- $15 billion in launch aid (including $4 billion for the A380) -
a subsidy that is unique to Airbus and is the most pernicious and
market-distorting subsidy under the law.
"Comparing today's decision with the decision last June reveals
a market distorted by Airbus' practices, with illegal launch aid
being the key discriminator," Luttig said. "The WTO ruling on
launch aid goes to the heart of the Airbus business model, which
now must change. In contrast, there are no comparable findings or
consequences to the U.S. or Boeing from today's decision, as the
WTO has now fully and finally rejected most of the EU's
claims."
"Illegal launch aid must end. Airbus must take immediate steps
to withdraw the outstanding prohibited subsidies provided to the
A380, and it must finance the A350 and all other future programs on
commercial terms," Luttig said. "With $16.6 billion of cash on
hand, EADS/Airbus can, and now must, develop its products without
illegal government subsidies," he added.
But Airbus claims that the WTO "condemned massive illegal Boeing
subsidies," in a news release of its own, which it says caused as
much as $45 billion in harm to the European planemaker. Airbus says
this follows years of unfounded accusations and attempts to
"demonize" Airbus, especially during the protracted campaign to win
the US Air Force contract for Tanker aircraft.
"Finally the truth emerges: Boeing has received and continues to
receive subsidies which have a significantly greater distortive
effect than the Reimbursable Loans to Airbus, " said Rainer Ohler,
Airbus' Head of Public Affairs and Communications. "Taking the
cases together, the WTO has now specifically green-lighted the
continued use of government loans in Europe and ordered Boeing to
end its illegal cash support from US taxpayers. It's time for
Boeing to stop denying or minimizing the massive illegal subsidies
it gets".
According to Airbus the WTO report confirms Airbus's earlier
assertions:
- Boeing would not have been able to launch the 787 without
illegal subsidies.
- Boeing has received "at least $5.3 billion" of US taxpayer
dollars which has been determined illegal.
- An additional over $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.
"Boeing has shot themselves in the foot with the WTO
proceedings," indicates Rainer Ohler. "The company has achieved a
massive condemnation of its U.S. funding mechanisms - provided the
U.S. is willing to implement the ruling - while the European
mechanism has been approved as a legal instrument. The only result
of this anachronistic battle is that it limits America's and
Europe's ability to compete with emerging competitors that have
access to unlimited government funding."
Airbus said it is pleased with the findings of the WTO report,
but understands that the European Commission may appeal a number of
issues relating to legal interpretation. Airbus fully supports the
European Commission in this respect.
Both sides may appeal today's ruling. Once any appeal concludes,
Boeing said it will support whatever steps the U.S. government
deems necessary to fulfill its WTO obligations, and expects the
same commitment to compliance from Airbus and its sponsor
governments.