LONDON — The appellate body within the World Trade Organization has published the first of two rulings looking at the subsidies received by large aircraft manufacturers such as Airbus and Boeing. The first ruling is related to the case against Airbus, with the second ruling expected later this year.
The findings confirmed that the loan partnerships taken out between Airbus and the respective European governments are legal and that they are not prohibited, especially with the European Repayable Launch Investment loans for civil aerospace development projects.
— Airbus PRESS (@AirbusPRESS) May 15, 2018
The WTO also added that all aspects of the Airbus A320 and A330 programs are in full compliance with the WTO regulations, adding that only little levels of action remained on the A380 program itself.
For the Airbus A350, the manufacturer still needs to address some issues regarding the Repayable Launch Investment loans, with the WTO saying that Airbus is currently trying to implement such solutions. It ultimately means that any US sanctions are now likely to be minorly compared to what the WTO can expect on the case against the subsidies that Boeing receives, which is argued to being “counter-productive and ill-timed”.
In their press release, Airbus went on the attack against Boeing saying: “While Airbus is preparing to make adjustments to fully implement the WTO recommendations, Boeing continues to make its own subsidy matters worse with abusive Washington State tax breaks, bad for taxpayers and global trade harmony alike.”
.@WTO: 94% of US/Boeing claims now dismissed and European loan system confirmed WTO compliant. Airbus pays back loans, while Boeing’s grants are never paid back. 2/3
— Airbus PRESS (@AirbusPRESS) May 15, 2018
Airbus claims that the state corporate welfare scheme within Washington D.C has provided “record-breaking state-level subsidies to Boeing for the launch of the 787 aircraft”, which was believed to be valued at around $5 billion USD. On top of this, an additional state incentive package for the 777X valued at around $8.7 billion in 2013 made this the largest state-level subsidy package within the history of the United States government. Airbus is saying that Boeing’s illegal activity is not done yet, with the manufacturer apparently looking at additional tax breaks for the planned construction of the manufacturer’s B797 NMA aircraft.
On top of this, an additional state incentive package for the Boeing 777X, valued at around $8.7 billion in 2013, made this the largest state-level subsidy package within the history of the United States government. Airbus is saying that Boeing’s illegal activity is not done yet, with the manufacturer apparently looking at additional tax breaks for the planned construction of the manufacturer’s B797 NMA aircraft.
Therefore, Airbus is saying that Boeing’s illegal activity is not done yet, with the manufacturer apparently looking at additional tax breaks for the planned construction of the manufacturer’s B797 NMA aircraft.
The second report is expected to include that for Boeing, there is around $5-6 billion worth of “inconsistent subsidies” between 1989 and 2006, with Washington State Tax breaks being around $3 billion between 2006 and 2024 (Confirmed by the WTO Appellate Report), tax abatements for the Wichita, Kansas facility, continued foreign sales corporation export subsidies (Despite WTO rulings that these are prohibited), continued NASA funded federal research programmes (Confirmed by the AB as illegal subsidies) as well as continued Department of Defense subsidies (Confirmed illegal by the WTO AB).
Airbus believes that this ultimately results in over $20 billion worth of non-repaid, “illegal” subsidies which are apparently causing up too $100bn in damage to the global market. The WTO Appellate Body also confirmed that the state subsidies given to Boeing for the 787 Program caused Airbus to lose around $16 billion in total sales.
“Today’s significant legal success for the European Union confirms our strategy […]. Today’s report is really only half the story – the Boeing ruling to come later this year will show where the balance lies.” Tom Enders – Airbus CEO 3/3
— Airbus PRESS (@AirbusPRESS) May 15, 2018
Airbus’ CEO Tom Enders commented on today’s findings saying: “Today’s significant legal success for the European aviation industry confirms our strategy which we have followed over all those years of the dispute. Of course, today’s report is really only half the story – the other half coming out later this year will rule strongly on Boeing’s subsidies and we’ll see then where the balance lies. The result is simple: Airbus pays back its loans, Boeing pays back nothing and continues to exploit the generosity of the U.S. taxpayer. Despite Boeing’s rhetoric, it is clear that their position today is straightforward healthy: they have half the market and a full order book, they have clearly not been damaged by Airbus repayable loans.”
Enders concluded by saying: “The current geopolitical climate for trade is worrying, and industry players should not fuel it with unproductive disputes that undermine fair competition worldwide and impact the workers in this industry as well as our customers and operators. The consequences of such disputes extend beyond the aerospace industry and affect economic growth on a global scale.”
Airbus’ General Counsel John Harrison added: “Airbus recognizes the importance of the WTO and the Appellate Body’s findings and will do what is necessary to correct any errors and this report confirms the efforts we are making. We likewise expect Boeing to take note when it comes to its compliance obligations. Boeing has in the past shown complete disregard by ignoring the recommendations and continuing with their illegal behavior. Boeing is now at more than 90 percent failed claims. This is proof of Boeing’s cynical PR motives in bringing this case about in the first place. It shatters Boeing’s claim it perpetuated for years that their WTO case undermines European industrial-government partnership.”
READ MORE: Boeing Officially Starts 777X Production
Finally, Airbus has called for all of those involved in this to accept the “global nature of trade” and to bring these disputes to an overall conclusion. They believe that negotiations between the EU and the U.S will settle this or through an established global agreement.
Boeing Also Claiming Victory Too?
Boeing also took to the stage to defend themselves. They said that the WTO found that the EU had failed to honor multiple previous rulings and has provided more than $22 billion of illegal subsidies to Airbus. They said that today’s rulings have given Boeing the leverage to go through the United States Trade Representative to seek damages in the form of tariffs against European imports to the United States. Such tariffs are believed to total billions in duties per year, “unless and until Airbus addresses the illegal subsidies it received from European governments for its most recently launched airplanes”.
With tariffs expected to be scheduled as early as 2019, it is expected to be the largest-ever WTO authorization of retaliatory tariffs put against the EU.
“Today’s final ruling sends a clear message: disregard for the rules and illegal subsidies is not tolerated. The commercial success of products and services should be driven by their merits and not by market-distorting actions,” said Dennis Muilenburg, Boeing Chairman, President, and CEO.
“Now that the WTO has issued its final ruling, it is incumbent upon all parties to fully comply as such actions will ultimately produce the best outcomes for our customers and the mutual health of our industry. We appreciate the tireless efforts of the U.S. Trade Representative over the 14 years of this investigation to strengthen the global aerospace industry by ending illegal subsidies,” Muilenburg continued.
Also, Boeing has said that the U.S government has complied with WTO rulings stemming from the tow initial suits brought against the United States. However, Boeing has said that one case had already ended in favor of the U.S as some of the allegations were dismissed. The U.S. has established that where there have been narrow rulings; the American government has addressed them as quickly as possible.
As a conclusion, Boeing believes that the claims made by Airbus about the Washington State Tax Measure will be reversed through ruling and concluded by adding that the manufacturer will do “whatever necessary to come into full compliance in the interest of upholding rules-based trade, which is essential to fairness and the future prosperity of the global aerospace industry”.