Both Interpret Appellate Body Ruling As Vindicating Their Point
Both Boeing and the European Commission have released statements
indicating that the ruling by an appellate body of the WTO
vindicates their position on government subsidies to the
“This is a clear, final win for fair trade that will level
the playing field for America’s aerospace workers,”
said Jim McNerney, Boeing chairman, president and chief executive
officer. “The WTO has concluded that launch aid and other
illegal Airbus subsidies distorted the market, harmed U.S. industry
and now must end. The administration—particularly the Office
of the U.S. Trade Representative—and the Congress are to be
commended for their long-standing efforts in this case to enforce
global trade rules. We join them in calling for immediate
compliance with this landmark ruling,” McNerney said.
“The WTO has rendered its final verdict, and now Europe
must comply within 6 months,” said Boeing Executive Vice
President and General Counsel J. Michael Luttig.
But from across the Atlantic: "I am particularly pleased with
this important result," said EU Trade Commissioner Karel De Gucht.
"The U.S. central claim that Airbus received prohibited export
subsidies has been dismissed in its entirety. In addition, a number
of claims, relating to R&D and infrastructure among others,
were either rejected or only partially accepted."
According to Beoing, the WTO confirmed that Airbus received $18
billion in illegal subsidies (principle amounts only). That
includes $15 billion in launch aid, including $4 billion for the
A380, without which Airbus could not have developed its fleet of
airplanes. It also includes $3 billion in non-launch aid subsidies,
which alone exceeds the $2.7 billion of un-remedied U.S. subsidies
to Boeing (mainly NASA R&D spending) that the WTO identified in
a separate ruling in March and that currently is under appeal.
“Airbus and its government sponsors have tried to justify
their illegal subsidy practices by claiming that Boeing benefited
equally from government R&D contracts,” Luttig said.
“But the WTO in March categorically rejected that argument,
dismissing 80% of the EU’s claims against the United States
and confirming the huge competitive advantage Airbus has as a
result of massive illegal government subsidies.”
Luttig stressed that Europe’s obligations resulting from
today’s decision do not hinge on the ultimate WTO decision in
the European case against the United States. “Europe must end
all practices held illegal by today’s
decision—particularly launch aid; government loans for the
A350 and future products must be on proven commercial terms,”
Luttig also answered recent calls by Europe for a negotiated
settlement. “I understand why Airbus and its sponsor
governments now want to negotiate. For 40 years they have relied on
massive injections of launch aid, which today were confirmed to be
illegal. We’re not interested in a settlement that would
allow a continuation of illegal launch aid—the most
pernicious, market-distorting subsidy of all,” he said.
“Airbus currently has more than $17 billion of cash on hand.
It can well afford to bring itself into compliance with the WTO
ruling and thereafter develop airplanes without illegal aid from
“The WTO rules, combined with the ruling in this case,
give clear guidance on what governments can and cannot do to
support their respective aerospace industries. These rules will
govern all market participants and help ensure that competitions
are won or lost based on the merits of the respective product
offerings rather than on government subsidies,” he said.
The European Commission, however, said the Appellate Body
overturned several key findings made by the Panel. Most
importantly, the Appellate Body found that support provided by
Germany, Spain and the UK for the launch of Airbus' A380 aircraft
is not a prohibited export subsidy under WTO Law. It also rejected
the U.S. appeal that other instances of Repayable Launch Investment
(RLI) were export subsidies.
According to the EC, the Appellate Body report, which is final
and will soon be adopted by the WTO's Dispute Settlement Body,
contains a number of clear findings – vindicating many of the
EU's long held positions – including:
- Repayable Launch Investment (RLI) for the A380 granted by
Germany, Spain and the UK is not a prohibited export subsidy.
- All R&D programs in the EU (European, national and
regional) are fully compatible with WTO rules, especially relevant
when compared to the findings on NASA and Department of Defense
support in the Boeing case.
- Treatment of infrastructure – the U.S. challenge on
Aeroconstellation in France has been fully rejected, and the
finding for the Muhlenberger Loch facility in Hamburg substantially
- The French government's transfer of its interest in Dassault
Aviation to Aerospatiale in 1998 was not a subsidy.
- The Appellate Body reduced the element of subsidy that may
exist in RLI, giving greater weight to the EU's proposed benchmark.
It also substantially reduced the impact of adverse effects
findings made by the Panel, reflecting the limited damage to Boeing
from Airbus subsidies.
Certain "actionable subsidy" findings do remain, even though the
economic impact of these support measures in the Large Civil
Aircraft (LCA) market has been found to be very limited. RLI may
contain an element of subsidy, however nowhere near the alleged
amount of $15-20 billion. Certain old equity infusions and
restructuring measures by France and Germany, infrastructure
measures in Germany and certain regional grants by Spain and
Germany also remain. The Commission will closely study the report
in consultation with stakeholders in order to determine the next
steps in this dispute.
The EC said in its statement that the ruling is a further step
to establishing the full picture of government support to the Large
Civil Aircraft (LCA) industry on both sides of the Atlantic. In the
EU's challenge of U.S. support to Boeing, the Panel found that
Boeing received prohibited export subsidies under the Foreign Sales
Corporation scheme, and programs by NASA, the Department of Defense
and Washington State tax breaks have caused wide-ranging adverse
effects to Airbus. Appeals to this panel report by the EU and the
U.S. are currently pending.