Trade authority rules Airbus got subsidies that hurt Boeing

EVERETT — The World Trade Organization said Thursday that Airbus is still benefiting from $22 billion in illegal government subsidies, an unfair advantage that has cost the Boeing Co. hundreds of airplane sales worth tens of billions of dollars.

The ruling is an important win in the United States’ long-running trade dispute with the European Union over whether the 28-country bloc is illegally helping airplane manufacturer Airbus.

The EU is expected to appeal, which could take as little as three months but likely will drag on for a year or more, a U.S. trade official said.

If the appeal fails, the U.S. could retaliate, with the WTO’s blessing, by imposing costly tariffs on EU goods and services.

A negotiated settlement between the EU and U.S. is also possible. U.S. trade officials have invited their counterparts to talk, but so far they’ve been rebuffed, U.S. Trade Representative Ambassador Michael Froman said.

Boeing leaders praised the ruling and criticized the EU and Airbus for doubling down on bad behavior after the WTO ruled in June 2011 that the EU and four member states — Germany, France, the United Kingdom and Spain — had improperly given the airplane maker more than $17 billion in subsidized financing. While the EU subsequently claimed to have come into compliance, the United States disagreed and requested that a compliance panel intervene.

Thursday’s ruling from the WTO panel found that the EU had not only failed to remedy the prior unfair support, but member countries had piled on another $5 billion in illegal aid, including $4 billion to help launch Airbus’ A350 XWB, a competitor to Boeing’s 787.

The “day of reckoning” has finally arrived, Boeing Executive Vice President and General Counsel J. Michael Luttig said in a statement. “The World Trade Organization has now found that Airbus is and always has been a creature of government and of illegal government subsidy.”

Boeing CEO and Chairman Dennis Muilenburg called the ruling “historic” for holding the EU and rival Airbus “to account for their flouting of global trade rules.”

“This long-awaited decision is a victory for fair trade worldwide and for U.S. aerospace workers, in particular,” Muilenburg said.

The company’s statement went so far as to say that Airbus might not even exist today if not for continued support of European governments.

The panel found that the subsidies likely had cost Boeing hundreds of aircraft sales since 2006. Boeing lost 271 orders for its single-aisle 737 to the Airbus A320 family, as well as market share in the EU, Australia, China and India. Boeing lost 50 orders for its 767, 777 and 787 to Airbus’ A330, A340, and A350 XWB. The illegal subsidies led to Boeing losing 54 orders for the 747 to Airbus’ A380.

Boeing has struggled to get 747 orders in recent years, forcing it to significantly cut back production. With its waning market prospects, many industry experts expect the company will stop making the iconic airplane in the next few years.

The subsidies threaten the jobs of thousands of American aerospace workers, said Democratic U.S. Sen. Patty Murray. “Their livelihoods are at stake. The economy in my home state of Washington is at stake.”

The Obama administration claimed victory in the trade dispute, parts of which stretch back to Airbus’ creation more than 40 years ago. U.S. Trade Representative Michael Froman called it “a sweeping victory for the United States and its aerospace workers.”

However, the U.S. did not run the table in its complaint with the WTO, an international body that helps resolve trade disputes. While the panel ruled mostly in America’s favor, it also found that EU financing was acceptable for some Airbus models.

Froman called on the EU, Germany, France, the United Kingdom and Spain to “respect the WTO rules” and “end subsidized financing of Airbus immediately.”

The WTO is still considering the EU’s complaint alleging that Boeing received banned federal and state support in the U.S.

“Watch this space,” Airbus said in a statement in reaction to Thursday’s ruling. “Before year-end the record subsidies for the 777X will almost certainly be condemned as illegal,” it said, referring to a new Boeing airliner.

The Associated Press contributed to this report. Dan Catchpole: 425-339-3454; dcatchpole@heraldnet.com. Twitter: @dcatchpole.