GENEVA — Washington state’s $3.2 billion in incentives to convince the Boeing Co. to build the new 787 Dreamliner in Everett hit the world stage Wednesday in the trans-Atlantic dispute with Airbus.
The European Union, arguing in hearings before the World Trade Organization, contended that what it called subsidies by the U.S. government and the states of Washington, Kansas and Illinois have cost Airbus $27 billion in lost revenue during the past three years.
The Washington aid package in what was a national competition for 787 assembly contained things such as tax incentives and establishment of state-run training centers for Boeing workers.
“The lavish subsidies … allowed Boeing to engage in aggressive pricing of its aircraft which has caused lost sales, lost market share and price suppression to Airbus on a number of select markets,” Brussels said in a statement as the hearings started. “The support clearly aims at weakening Airbus’ position and competitiveness.”
The U.S. said government contracts do not give the Chicago-based company an unfair advantage, and noted that Airbus has actually gained 20 percentage points of market share at Boeing’s expense since 2000.
Globally, the market for planes is worth an estimated $3 trillion over the next two decades.
The clash, expected to be the most complicated and costly in the WTO’s 12-year-history, rests on the ability of the U.S. and the EU to show that the alleged subsidies have caused their industries harm. Both have presented evidence of lost plane sales or lowered prices to back up their claims.
An interim ruling in the U.S. case was scheduled for October, but has been delayed because of the complexity of the dispute. A decision on the EU’s complaint is not expected until next year. Both would be subject to appeals.
The U.S. accuses Airbus of taking advantage of decades of European subsidies worth the equivalent of up to $205 billion to capture long-standing Boeing customers and become the world’s largest seller of planes.
The EU also accuses the U.S. of providing vast amounts of hidden support to Boeing through military contracts, citing a total subsidy figure through 2024 of $23.6 billion.
Brussels said $5 billion in illegal U.S. subsidies to Boeing from 2004-06 had a more than fivefold negative effect on Airbus revenues in that period.
“The EU’s claims are to distract attention from its own massive subsidies,” said Gretchen Hamel, a spokeswoman for the U.S. trade representative in Washington, D.C. She said the EU had vastly inflated the value of NASA and other government programs involving Boeing, and cannot prove that they have harmed Airbus’ development of planes or sales.
The EU made its final defense in July of the government loans used to help Airbus develop new planes, before the WTO rules on whether the so-called “launch aid” is legal. The WTO decision could have far-reaching ramifications for the France-based planemaker, which still must decide how it will fund its midsize, long-range A350 XWB — which has already been subject to a costly redesign.
Bob Novick, a former U.S. trade lawyer representing Boeing on WTO matters, said any problems Airbus has experienced were the result of its failure to recognize early enough the importance airlines were putting on fuel efficiency, and the company’s choice at the beginning of the decade to invest in the A380 superjumbo instead of a smaller, more efficient plane.
“When Airbus rushed out a proposed A350 model to compete with the 787, it was rejected by the market. A second proposal was also rejected,” Novick said. “The EU cannot blame that on contrived subsidies to Boeing.”
Airbus delivered the most planes last year, but fell behind Boeing on orders for the first time in six years after suffering from a series of production setbacks and leadership crises.
Senior EU trade officials rejected the idea that plane design shortcomings or any other company mistakes were responsible for the revenue loss.
“The U.S. case has always rested on a bizarre premise: U.S. grants to Boeing are WTO-compliant, while repayable European loans to Airbus are not,” said Geoff Shuman, Airbus’ director of European affairs. “Not a single Boeing civil jet transport aircraft program has ever been developed without massive U.S. government subsidies.”
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