Airbus, Boeing: The Fight Isn't Over

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Doing Nothing Is an Option

Even then, experts note that there's another shoe to drop first: The WTO is expected to rule sometime in early 2010 on the EU's counter-complaint that Boeing's contracts with the Pentagon are tantamount to R&D subsidies—and could well rule against the U.S. in that dispute. And while the WTO rulings could empower the U.S. and EU to impose tariffs against each other—slapping penalties on jets, or even French wine and Washington State apples—trade negotiators could conclude such moves would be counterproductive.

"By the time this is all said and done, the governments may decide to do nothing," says Scott Hamilton, an aerospace industry consultant based in Issaquah, Wash. "That's what Canada and Brazil did" in a mutual dispute over subsidies to both Montreal-based Bombardier (BBDb.TO) and Embraer (ERJ), which is based in São José dos Campos, Brazil.

Indeed, industry veterans say Boeing's intentions in pushing the U.S. to file its case in 2004 were never done with the belief that it could cut off government subsidies to EADS. Rather, Boeing's real intent may simply have been to try to scare private lenders off of providing the financing it needed to finish development of the A380 jet—or even as a smokescreen to deflect attention from its own culpability in a bribery scandal that involved a top executive and an Air Force weapons buyer. "There's been a theory shared by many in the industry that [the WTO case] was filed to divert attention from [Boeing's] own scandal," says Hamilton.

Governments Recognize the Industry's Impact

Now, some analysts expect Boeing to use the WTO ruling as a lever to convince Pentagon officials to award it the lucrative tanker contract, which was initially given to a team consisting of EADS and Northrop Grumman but later reopened after the Government Accountability Office found problems with the bidding process.

And while some media reports quoted trade experts predicting that the U.S. and EU will attempt to resolve the dispute through bilateral negotiations, Aboulafia says such talks "will be about as useful as the German-Russian nonaggression treaty," a 1939 pact in which those nations secretly agreed to carve up Northern and Eastern Europe. That's because many countries—be it the U.S., France, or even others like Russia and China that are trying to nurture their own aerospace industries—realize the economic impact of supporting aircraft manufacturers.

Thus, even if the U.S. prevails in its WTO claim, "governments will just find a different way to provide financial support" to their aerospace industry, says Aboulafia. Until then, the legal games will continue.

Foust is chief of BusinessWeek's Atlanta bureau. With Carol Matlack in Paris

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