Saturday, August 29, 2009

Update: Big WTO Decision on Aircraft Subsidies

As the Sept. 4 release of the WTO panel's preliminary ruling in the Boeing-Airbus dispute approaches, Boeing has gone on the offensive. According to Reuters on Thursday:
Boeing hopes a preliminary World Trade Organization panel ruling next week will force European governments to reconsider plans to help finance Airbus' planned A350 widebody passenger jet, a company official said on Thursday.

The confidential ruling comes at a "very contemporary moment as far as launch aid is concerned," Ted Austell, Boeing's vice president for government operations, told reporters.

"Since the Paris Air Show, the sponsoring European governments of Airbus have been talking about new launch aid for the A350, and we are hoping the interim decision will be informative enough that it will arrest any new launch aid for that aircraft which has the same shape and texture of previous launch aid," Austell said.

Apparently Mr. Austell didn't read my blogpost from Wednesday night (can't really blame him!) on the probable timeline for real resolution of the longstanding conflict between the US (Boeing) and EU (Airbus) over civil aircraft subsidies. As you'll recall, after discussing a lot of the remaining procedural hurdles at the WTO and likely US and EU positions during the next stages, I concluded:
So while this preliminary decision is certainly interesting from an academic standpoint, and I'm sure that the US, EU, Boeing and Airbus are very interested to see the panel's reasoning, and the decision should produce some nice headlines and good quotes from [USTR Ron] Kirk and [EU Trade Commish] Catherine Ashton, the idea that a "permanent and complete end to launch aid" is anywhere on the near-term horizon is probably too optimistic (to put it mildly).
Well, not to get all I-told-you-so on Mr. Austell, but yesterday we saw the first signals from the EU and Airbus that my conclusions were right. Here's Bloomberg on the less-than-shocking development:
The European Union signaled governments will proceed with subsidies for the Airbus SAS A350 even if a pending World Trade Organization decision finds previous aid to the biggest planemaker was illegal.

“Independently of new developments in the current case before the WTO, it has always been our position that any support for the A350 has no relation to the current WTO litigation,” Lutz Guellner, a spokesman for the European Commission, the 27- nation EU’s executive arm in Brussels, said today in a statement. The A350 will challenge Boeing Co.’s 787 and 777.


A WTO panel is set to issue a preliminary ruling Sept. 4, addressing whether Europe violated WTO rules when the three European nations provided launch aid for previous Airbus models. Airbus benefited from risk-free grants worth $23 billion over the past four decades, the 2004 U.S. complaint alleged.


Airbus itself says it has a right to the loans.

“Boeing received more than $5 billion in grants and other subsidies for the 787 from the U.S. taxpayer alone, none of which is repayable,” the Toulouse, France-based planemaker said in a statement. Loans for the A350 will “ensure fair competition and level the playing field with Boeing,” Airbus said.
Airbus' snotty taunting aside, I think it's safe to say that this conflict's not getting resolved anytime soon. But considering the money, tempers and history involved, this shouldn't really come as a surprise to anyone, and it seems that the "best case scenario" here is for both sides figure out a way to prevent further escalation - and delay! - of the dispute.

(I'm not holding my breath.)

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