Published: Thursday, July 1, 2010
Subsidies gave Boeing’s rival unfair advantage, WTO rules
The decision’s impact remains unclear, however, because the trade agency has yet to rule on similar claims against Boeing.
European governments gave Boeing Co. rival Airbus illegal subsidies that unfairly helped it as it rose to become the world’s No. 1 jetmaker, the World Trade Organization ruled Wednesday.
Boeing hailed the ruling.
“This is a landmark decision and sweeping legal victory over the launch aid subsidies that fueled the rise of Airbus and that continue to provide its products a major cost advantage,” said Jim McNerney, Boeing’s chairman and chief executive officer.
The 1,061-page decision was made public Wednesday, but it was delivered three months ago to U.S. and European Union trade officials. Parts of the decision were widely reported then.
The agency has yet to issue its decision about similar claims against Boeing, so it’s unclear just what it will mean in the long-running legal dispute. Together, the two rulings could set important guidelines for an industry worth $3 trillion over the next two decades, and one that may soon include new competitors from China and elsewhere.
“This important victory will benefit American aerospace workers, who have had to endure watching Airbus receive these massive subsidies for more than 40 years,” U.S. Trade Representative Ron Kirk said. “Today’s ruling helps level the competitive playing field with Airbus.”
Airbus also claimed victory, saying that 70 percent of the U.S. claims were denied.
“Research grants were condemned with important implications for the coming report on U.S. subsidies to Boeing,” said Rainer Ohler, head of public affairs for Airbus. “Airbus expects the WTO to issue the interim report on Boeing subsidies very soon.”
The WTO verdict confirms wrongdoing by Europe’s supporters of Airbus in the form of billions of dollars in development loans for new jets that didn’t have to be repaid until planes were sold.
The U.S. valued the launch aid at more than $200 billion.
Boeing’s supporters in Congress applauded the ruling Wednesday, calling on the administration to hold Airbus accountable.
“Launch aid is an illegal subsidy that has undercut our workers, cost us jobs, hurt our ability to compete, damaged our overall economy, and it needs to end,” Sen. Patty Murray, D-Wash., said in a press conference Wednesday.
Reps. Rick Larsen and Jay Inslee, both D-Wash, also decried the subsidies.
“The jury is back and the verdict is in: The European Union is guilty of providing Airbus with billions of dollars in illegal subsidies,” Larsen said. “The WTO ruling is clear — the EU’s illegal subsidies have directly harmed American workers.”
Both Inslee and Larsen called on Robert Gates, the secretary of defense, to consider the ruling in deciding whether Boeing or Airbus parent EADS should receive the $35 billion contract to build the new Air Force refueling tanker.
“The WTO ruling must be the final nail in the coffin of launch aid,” Larsen said. “Airbus needs to cut off its illegal subsidies for the A350 immediately and try to develop planes the old-fashioned way: using private capital with market interest rates.”
Gov. Chris Gregoire said the ruling “demonstrates why the Pentagon should consider the fact that one of the bids for the new refueling tanker will be an illegally subsidized airplane.”
Sen. Richard Shelby, R-Ala., who represents the area where EADS would assemble its refueling tanker if it wins the competition, said exactly the opposite.
“The WTO report states that the A330-200, the airframe EADS will offer for the tanker competition, did not receive prohibited subsidies,” Shelby said.
The report is so complicated that few reporters, politicians or even company executives will ever get through all of it — let alone understand it.
The EU and Airbus cited a number of findings they said were in their favor.
Airbus spokesman Ohler said the panel found that launch aid didn’t cause “material injury” to U.S. interests and rejected claims that it cost jobs and profits in the U.S. and that it affected Boeing prices.
Kirk, the U.S. trade representative, seemed to be saying the opposite.
“These subsidies have greatly harmed the United States, including causing Boeing to lose sales and market share,” he said.
Washington and Brussels have 60 days to lodge appeals, and Airbus said both sides are expected to challenge elements of the ruling.
“Airbus expects this dispute to continue for a few more years,” the company said in a statement.
Demonstrating that the subsidies actually harmed Boeing was a key requirement for the U.S., which brought the case to the WTO in 2004 after pulling out of a 12-year-old agreement with the EU that regulated subsidies in the civil aviation industry.
Boeing wants the WTO ruling to pre-empt similar European plans for funding Airbus’ midsize, long-haul A350 XWB that aims to compete with the American company’s 787 Dreamliner.
“The panel said that without the illegal subsidies it received, Airbus would not have the aerospace market share it now enjoys,” said Boeing Executive Vice President J. Michael Luttig.
Airbus beat rival Boeing in aircraft production in 2009, delivering a record 498 aircraft and maintaining its place as the world’s largest planemaker, with Boeing delivering 481. Airbus also posted 271 orders, beating Boeing’s 142.
The Associated Press contributed to this story.
Boeing hailed the ruling.
“This is a landmark decision and sweeping legal victory over the launch aid subsidies that fueled the rise of Airbus and that continue to provide its products a major cost advantage,” said Jim McNerney, Boeing’s chairman and chief executive officer.
The 1,061-page decision was made public Wednesday, but it was delivered three months ago to U.S. and European Union trade officials. Parts of the decision were widely reported then.
The agency has yet to issue its decision about similar claims against Boeing, so it’s unclear just what it will mean in the long-running legal dispute. Together, the two rulings could set important guidelines for an industry worth $3 trillion over the next two decades, and one that may soon include new competitors from China and elsewhere.
“This important victory will benefit American aerospace workers, who have had to endure watching Airbus receive these massive subsidies for more than 40 years,” U.S. Trade Representative Ron Kirk said. “Today’s ruling helps level the competitive playing field with Airbus.”
Airbus also claimed victory, saying that 70 percent of the U.S. claims were denied.
“Research grants were condemned with important implications for the coming report on U.S. subsidies to Boeing,” said Rainer Ohler, head of public affairs for Airbus. “Airbus expects the WTO to issue the interim report on Boeing subsidies very soon.”
The WTO verdict confirms wrongdoing by Europe’s supporters of Airbus in the form of billions of dollars in development loans for new jets that didn’t have to be repaid until planes were sold.
The U.S. valued the launch aid at more than $200 billion.
Boeing’s supporters in Congress applauded the ruling Wednesday, calling on the administration to hold Airbus accountable.
“Launch aid is an illegal subsidy that has undercut our workers, cost us jobs, hurt our ability to compete, damaged our overall economy, and it needs to end,” Sen. Patty Murray, D-Wash., said in a press conference Wednesday.
Reps. Rick Larsen and Jay Inslee, both D-Wash, also decried the subsidies.
“The jury is back and the verdict is in: The European Union is guilty of providing Airbus with billions of dollars in illegal subsidies,” Larsen said. “The WTO ruling is clear — the EU’s illegal subsidies have directly harmed American workers.”
Both Inslee and Larsen called on Robert Gates, the secretary of defense, to consider the ruling in deciding whether Boeing or Airbus parent EADS should receive the $35 billion contract to build the new Air Force refueling tanker.
“The WTO ruling must be the final nail in the coffin of launch aid,” Larsen said. “Airbus needs to cut off its illegal subsidies for the A350 immediately and try to develop planes the old-fashioned way: using private capital with market interest rates.”
Gov. Chris Gregoire said the ruling “demonstrates why the Pentagon should consider the fact that one of the bids for the new refueling tanker will be an illegally subsidized airplane.”
Sen. Richard Shelby, R-Ala., who represents the area where EADS would assemble its refueling tanker if it wins the competition, said exactly the opposite.
“The WTO report states that the A330-200, the airframe EADS will offer for the tanker competition, did not receive prohibited subsidies,” Shelby said.
The report is so complicated that few reporters, politicians or even company executives will ever get through all of it — let alone understand it.
The EU and Airbus cited a number of findings they said were in their favor.
Airbus spokesman Ohler said the panel found that launch aid didn’t cause “material injury” to U.S. interests and rejected claims that it cost jobs and profits in the U.S. and that it affected Boeing prices.
Kirk, the U.S. trade representative, seemed to be saying the opposite.
“These subsidies have greatly harmed the United States, including causing Boeing to lose sales and market share,” he said.
Washington and Brussels have 60 days to lodge appeals, and Airbus said both sides are expected to challenge elements of the ruling.
“Airbus expects this dispute to continue for a few more years,” the company said in a statement.
Demonstrating that the subsidies actually harmed Boeing was a key requirement for the U.S., which brought the case to the WTO in 2004 after pulling out of a 12-year-old agreement with the EU that regulated subsidies in the civil aviation industry.
Boeing wants the WTO ruling to pre-empt similar European plans for funding Airbus’ midsize, long-haul A350 XWB that aims to compete with the American company’s 787 Dreamliner.
“The panel said that without the illegal subsidies it received, Airbus would not have the aerospace market share it now enjoys,” said Boeing Executive Vice President J. Michael Luttig.
Airbus beat rival Boeing in aircraft production in 2009, delivering a record 498 aircraft and maintaining its place as the world’s largest planemaker, with Boeing delivering 481. Airbus also posted 271 orders, beating Boeing’s 142.
The Associated Press contributed to this story.
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