Airbus receives mixed ruling by WTO

Posted on 19 May 2011 by The Manufacturer

The WTO partially overturned a ruling that had accused EU states of giving Airbus illegal subsidies, but said the aircraft maker did receive billions of dollars of unfair aid that harmed Boeing.

The World Trade Organisation (WTO) yesterday dismissed a number of claims made against European aerospace giant Airbus that the EU subsidies it has received for construction of the A380 aircraft are unlawful. Airbus’s chief competitor, Boeing, has been the driving force behind these claims which are a key part of a saga of rivalry between the EU-US competitors which has lasted over a decade.

Yesterday WTO made a partial overturning of its decision last year that the billions of euros that Airbus had received in EU subsidies were a complete violation of its rules for competition. While the new ruling does not resolve all areas of controversy, it did vindicate subsidies made as part of the A380 ‘launch’ project, formed in public-private partnerships.

Airbus have stated that the ruling is a victory for the European aerospace industry and says it looks forward to further growth through the establishment of new funding schemes within the same guidelines. This will come as welcome news to production sites for the Airbus A380 superjumbo in Germany, France, Spain and the UK.

On the other side of the Atlantic however, Boeing representatives were also jubilant about the WTO ruling. From their perspective the decision still leave around $18bn of funding given to Airbus outside the scope of fair competition.

“We’re enormously pleased with these findings,” said Tim Reif of the US general counsel for trade, commenting on the latest decision in the longest-running transatlantic trade dispute.

“This report confirms [that] for decades the European Union… [has] provided massive amounts of market-distorting launch aid and other subsidies that are inconsistent with WTO rules.”

Market and industry analysts reviewing the new ruling from WTO have said that the decision puts Airbus in a strong, but not unassailable, position. The most important point within the ruling for Airbus, says Ilana Bet-El, an independent aerospace analyst, is that Airbus have won on the point of principle that funding was not aimed at boosting exports. This is considered the most blatant breach of WTO rules on competition.

Business Secretary Vince cable commented on the findings: “I greatly welcome today´s findings from the WTO Appellate Body. The WTO has finally rejected the US´ main allegations of illegal EU support to Airbus, and has endorsed the principle of European Governments providing repayable loans to companies to contribute towards the development of new aircraft.

“I am pleased the report also reverses a number of the other findings made by the original panel, and concludes that any adverse impact on Boeing is far lower than has been alleged. The findings that remain against Europe are now much more limited in scope but we will, of course, work to address them.

“The WTO’s conclusions confirm that this has been an unproductive and costly process, which has not served the interests of taxpayers or industry in either Europe or the US.”

WTO’s decision yesterday means that Airbus will be released from any immediate need to pay back money given to it by the EU for the manufacture and construction of the A380. Undoubtedly however the US government and Boeing will continue to haggle on this issue.

Boeing itself has been far from squeaky-clean in relation to illegal funding allegations. Indeed earlier this month another ruling found the company guilty of accepting over $5bn of unlawful government aid.