“Finally the truth emerges: Boeing has received and continues to receive subsidies which have a significantly greater distortive effect than the Reimbursable Loans to Airbus, “ said Rainer Ohler, Airbus’ Head of Public Affairs and Communications. “Taking the cases together, the WTO has now specifically green-lighted the continued use of government loans in Europe and ordered Boeing to end its illegal cash support from US taxpayers. It’s time for Boeing to stop denying or minimizing the massive illegal subsidies it gets”. 

The WTO-report published today confirms Airbus’s earlier predictions: 

1 – Boeing would not have been able to launch the 787 without illegal subsidies.

“What is clear to us is that, absent the aeronautics R&D subsidies, Boeing would not have been able to launch an aircraft incorporating all of the technologies that are incorporated on the 787…” (para. 7.1775)

“[T]he R&D subsidies … contributed in a genuine and substantial way to Boeing’s development of technologies for the 787.” (paras. 7.1754, 7.1773 and 7.1794).

2 – Boeing has received “at least $5.3 billion” of US taxpayer dollars which has been determined illegal.  

“[W]e have estimated that the amount of these subsidies to Boeing’s LCA division was at least $5.3 billion.” (para. 7.1433).

3 – An additional over $2 billion in state and local subsidies that Boeing will receive in the future are illegal. 

“[T]he Panel finds that the Washington [tax credits] are specific subsidies to Boeing.” “[W]e recommend that … the United States ‘take appropriate measures to … withdraw the subsidy’.” (Paras. 7.302, 8.9).

4 – The effect of the subsidies is significantly larger than the face value of the subsidies in light of their particularly pervasive nature.

“Precisely because the nature of this kind of subsidy is that it is intended to multiply the benefit from a given expenditure, the Panel considers it unlikely that the effects of such expenditure … would be reducible to its face amount.” (para. 7.1760)

5 – The pervasive subsidies have thoroughly distorted competition within the aviation industry, directly resulting in significant harm to the European aerospace industry. 

 “[W]e would characterize the NASA R&D subsidies as strategically-focused R&D programmes with a significant and pervasive commercial dimension.” (para. 7.1764)

“[The subsidies] enabled Boeing to lower its prices beyond the level that would otherwise have been economically justifiable…. [T]his led to it securing sales that it would not otherwise have made, while in other cases, it led to Airbus being able to secure the sale only at a reduced price.  (para. 7.1818)

6 – The effect of these subsidies will continue in the future, putting Airbus at a significant disadvantage. 

“We note further that, to the extent that these subsidies have enabled Boeing to win sales from Airbus in the past, they have served to entrench Boeing as the incumbent supplier, thereby putting it at an important switching cost advantage over Airbus in future sales.” (para. 7.1818)

“Boeing has shot themselves in the foot with the WTO proceedings,” indicates Rainer Ohler. “The company has achieved a massive condemnation of its U.S. funding mechanisms – provided the U.S. is willing to implement the ruling – while the European mechanism has been approved as a legal instrument. The only result of this anachronistic battle is that it limits America’s and Europe’s ability to compete with emerging competitors that have access to unlimited government funding.” 

Airbus is pleased with the findings of the WTO report, but understands that the European Commission may appeal a number of issues relating to legal interpretation.  Airbus fully supports the European Commission in this respect.     

Full version of the report: www.wto.org (search item DS353)

Boeing: WTO Ruling Exposes Massive Airbus Advantage From Illegal Subsidies

CHICAGO, March 31, 2011 /PRNewswire/ — A World Trade Organization final case ruling published today confirms the massive market advantage Airbus has enjoyed from billions in illegal government subsidies provided to fund the company’s commercial airplane product line since its inception more than 40 years ago.      

“This WTO ruling shatters the convenient myth that European governments must illegally subsidize Airbus to counter U.S. government assistance to Boeing,” said J. Michael Luttig, Boeing (NYSE:BA) executive vice president and general counsel.  “The ruling rejects 80 percent of the EU’s claims against the U.S., finding no more than $2.7 billion of impermissible subsidies to Boeing not previously remedied. That amount includes $2.6 billion in NASA R&D funding, which is but a small fraction of the total amount challenged,” Luttig said.

Today’s ruling resulted from the European Union’s attempt to counter a U.S. case that successfully challenged illegal subsidies to Airbus.  Last June, the WTO upheld approximately 80% of the U.S. claim, finding Airbus had received more than $20 billion in illegal government subsidies, which harmed the U.S. aerospace industry and resulted in the loss of billions in exports and tens of thousands of U.S. jobs.  

Illegal government subsidies to Airbus included:

• $1.5 billion in R&D subsidies,
• $1.7 billion in infrastructure subsidies,
• $2.2 billion in equity infusions, and
• $15 billion in launch aid (including $4 billion for the A380) – a subsidy that is unique to Airbus and is the most pernicious and market-distorting subsidy under the law.

“Comparing today’s decision with the decision last June reveals a market distorted by Airbus’ practices, with illegal launch aid being the key discriminator,” Luttig said. “The WTO ruling on launch aid goes to the heart of the Airbus business model, which now must change. In contrast, there are no comparable findings or consequences to the U.S. or Boeing from today’s decision, as the WTO has now fully and finally rejected most of the EU’s claims.”

Both sides may appeal today’s ruling. Once any appeal concludes, Boeing will support whatever steps the U.S. government deems necessary to fulfill its WTO obligations, and expects the same commitment to compliance from Airbus and its sponsor governments.

“Illegal launch aid must end. Airbus must take immediate steps to withdraw the outstanding prohibited subsidies provided to the A380, and it must finance the A350 and all other future programs on commercial terms,” Luttig said.

“With $16.6 billion of cash on hand, EADS/Airbus can, and now must, develop its products without illegal government subsidies,” he added.

Luttig said the WTO had done an outstanding job adjudicating the subsidy dispute.

“An impartial arbiter has spoken, and has set important precedents for all nations with ambitions to grow their aerospace industries. Compliance with WTO rules is essential to fair play and to the public’s confidence in the global trading system,” he said.

Source: Airbus and Boeing