A long-awaited World Trade Organization decision next Tuesday on state support for Airbus planes will clarify rules on industrial subsidies but does not mean the end of the decades-old civil aircraft dispute. Subsidy rules are at the heart of the transatlantic battle for dominance in a market that aerospace firms estimate will be worth $3 trillion over the next 20 years.
The WTO panel’s ruling, although final, is confidential to the parties in the case — the United States as plaintiff and the European Union as defendant. Publication of the 1,000-page document must await translation and could take until the end of April or longer. And even if the ruling condemns support by European governments for the airliners built by EADS subsidiary Airbus, the EU will argue that a full picture will only emerge when the WTO rules on a countersuit brought by Brussels against U.S. support for Boeing planes.
Final resolution of the two cases — which may yet involve a negotiated settlement — will define the rules of the civil aviation market, where Airbus and Boeing have together nearly $1 trillion of aircraft on their orderbooks awaiting production, for years to come. In theory a WTO ruling on Tuesday could require the EU to desist from further aid within weeks. In practice both sides are certain to appeal both cases, stringing the litigation out for many months or years.
The United States argues that Airbus got a total of $205 billion in unfairly priced loans and other benefits from France, Germany, Spain and Britain over two decades — making the case by far the biggest international trade dispute. One of Washington’s main aims is to deter European launch aid for Airbus’s new A350, which will compete with Boeing’s 777 and 787 planes. It is also keen to set a marker for other countries like China, Brazil, Canada and WTO-candidate Russia which are eyeing the market for long-range passenger planes.
“The final panel decision will establish clear guidelines for European governments and other countries looking to break into commercial airplane development about what type of state financing is or isn’t appropriate when building airplanes,” Boeing’s external counsel Bob Novick said. “With regard to the future, it would be troubling if the European governments were to go ahead and provide launch aid for the A350 if the WTO had just ruled launch aid was illegal for another plane’s development,” he told Reuters.
EU-US trade relations have been soured by the decision of Airbus and its U.S. partner Northrop Grumman to withdraw from the $50 billion competition for a new U.S. military tanker, leaving the field open to Boeing and prompting accusations of U.S. protectionism from European leaders. EADS is in a poor position to repay any aid deemed illegal, having just required a 3.5 billion euro ($4.78 billion) rescue deal to save Airbus’s delayed A400M military transporter.
But Airbus Americas spokeswoman Maggie Bergsma said the “never-ending story” was far from over and the matter would only come into perspective when the WTO issues a ruling — also confidentially — on Boeing support, expected in June. “Let’s see if Boeing’s supporters are still as enthusiastic about WTO compliance when their subsidy report comes out in summer,” she told Reuters.
The U.S. case argues that European governments not only provided “actionable” subsidies damaging American businesses, but also furnished completely “prohibited” subsidies linked to export promotion, which must be withdrawn quickly. The U.S. also argues the aid amounted to a systematic programme which should be banned — with implications for future support for the A350.
After the WTO circulated an interim ruling in September, sources familiar with the report said the panel had agreed that subsidies were actionable, backed some but not all the U.S. claims of prohibited subsidies and rejected the idea the support formed a systematic and open-ended programme.