Bloomberg News

WTO Judges to Decide If EU Has Ended Illegal Airbus Aid

April 13, 2012

The World Trade Organization agreed to decide whether the European Union has removed subsidies to Airbus SAS (EAD) that break commerce rules, the first step to possible retaliatory sanctions against the EU.

The U.S., which requested the so-called compliance panel today in Geneva, said on March 30 that illegal EU aid to the airplane maker had “cost American aerospace companies tens of billions of dollars in lost revenue.” The EU said in December it had scrapped all aid deemed trade-incompatible by the WTO.

WTO judges ruled in June 2010 that loans by Spain, the U.K., France and Germany were unfair subsidies that had an adverse effect on Airbus’s U.S. competitor, Boeing Co. (BA:US) While the trade arbiter can’t force nations or companies to eliminate illegal payments, it can authorize retaliatory sanctions against governments that fail to comply with its rulings.

The EU submitted its compliance report on Dec. 1 as part of the seven-year legal battle over aid to Airbus and Boeing, the world’s two biggest commercial planemakers. The EU said it had secured repayment of $2.3 billion in launch-aid loans and terminated the loan agreements in question, while also addressing subsidies given in the form of capital contributions, infrastructure support and regional aid.

U.S. Trade Representative Ron Kirk dismissed the EU assertion, saying the bloc had failed to halt government aid for Airbus to build aircraft, including the A380 superjumbo, and even provided new illegal subsidies after the WTO ruling. He said on March 30 that the U.S. “remains prepared to engage with the EU in any meaningful efforts that will lead to the goal of ending subsidized financing at the earliest possible date.”

Boeing Aid

WTO judges have also ruled that illegal subsidies from the U.S. and individual states to Chicago-based Boeing had damaged Airbus by more than $5.3 billion. Appeals judges affirmed on March 12 that Boeing received illegal aid of $3.1 billion from NASA, Washington state and Wichita, Kansas, and between $100 million and $1.2 billion from U.S. Department of Defense contracts. The U.S. has until the third week of September to eliminate that aid.

The U.S. and Europe filed counter-cases at the WTO in 2004 after the administration of President George W. Bush unilaterally walked out of a 1992 aircraft-aid accord with the EU. Toulouse, France-based Airbus, which had a record 1,419 orders in 2011 to extend its lead over Boeing, delivered 534 aircraft last year while its rival delivered 477.

Both governments reserved their right to appeal the compliance panel’s findings. If that happens, they agreed to work together to ensure the WTO Appellate Body could issue its ruling within 90 days.

To contact the reporter on this story: Jennifer M. Freedman in Geneva at jfreedman@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net


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