Airbus subsidies illegal, world body rules

The World Trade Organisation said Britain and other European countries gave billions to Airbus in illegal subsidies, in a trade dispute ruling that backed its rival, US aviation giant Boeing.

The preliminary ruling by the Geneva-based WTO, although expected to be challenged by the European Union, could begin to shake up the £2trn (€2.3trn) global market in new airliners, in which Airbus has overtaken Boeing.

But the next stage in the dispute will be a decision that may well go the other way. The international trade body will rule next year in an Airbus challenge to what it sees as unfair US government support for Boeing.

Yesterday’s decision confirmed a complaint by the United States, filed in 2004, that “all Airbus aircraft have received illegal subsidies and that these have caused material harm to Boeing”, said Rep Norm Dicks, a Washington state Democrat among those briefed by US trade officials on the yet-to-be released decision.

Another Washington state Congressman, Democrat Jim McDermott, said: “We learned in a WTO ruling that Airbus has enjoyed an unfair competitive advantage over Team Boeing for decades.”

But European officials who were briefed had a somewhat different take on the ruling from American politicians and officials, suggesting that many of the complaints lodged by the US had been dismissed.

They also said the kind of easy-term loans provided by European governments to Airbus were in some instances seen as a permissible form of financing.

A US official, speaking anonymously, said the report was clearly not in Airbus’ favour and was a rebuke to decades of European government help.

The WTO finding was the first step in a process that could take years to produce a final result.

The organisation does not have the power to impose sanctions itself, but it can allow a nation that has been harmed – in this case the US – to raise tariffs or impose other barriers to imports from an offending country or countries.

While this was a clear victory for the US, analysts suggested it reflected not the current world, in the grips of global recession, but the business world as it stood five years ago when open trade was the rule and anti-competitive, protectionist practices generally denounced.

Since then, hundreds of billions have been spent in government subsidies and takeovers of failing banks and car makers in an effort to combat the worst global downturn since the Great Depression.

And other countries, including China, Japan and Brazil, are busy expanding or developing their domestic airline industries.

The American case protested at “launch aid”, easy-term loans that were extended primarily by France, Britain, Spain and Germany to help Airbus develop new jets as it overtook Boeing as the world’s top producer of commercial planes.

“The US has always maintained that the European governments have provided unfair subsidies to Airbus that harm US interests,” said Deborah Mesloh, deputy assistant US trade representative in Washington.

However, the EU counter-case against the US – with a ruling expected in about six months – could find that America was also engaging in illegal trade practices in helping Boeing, including contracts awarded by the Pentagon and Nasa.

“We have a good case against them, and they have a serviceable case against us,” said Jeffrey Schott, a trade expert with the Peterson Institute for International Economics.

Both disputes in the Boeing-Airbus rivalry are over what is projected to be a £2trn global aviation market over the next 20 years.

Senator Maria Cantwell, another Washington state Democrat, said the case “sets an important precedent that must be respected by all countries with an emerging commercial aircraft industry”.

She said it should discourage European governments from going ahead with an additional £2.8bn (€3.26bn) in proposed subsidies for Airbus to develop its new extra wide-bodied A350 airliner, which will compete with Boeing’s long-delayed 787 Dreamliner.

Financing for the A350 airliner was not part of the US case before the WTO.

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