Airbus Subsidies From Europe Are Ruled Improper

Airbus Subsidies From Europe Are Ruled Improper
By CHRISTOPHER DREW
Copyright by The New York Times
Published: June 30, 2010
http://www.nytimes.com/2010/07/01/business/global/01wto.html?ref=global-home


The United States won an “important victory” in a trade ruling that a European company had benefited from improper subsidies on a variety of commercial planes, taking sales from Boeing as a result, the United States trade representative, Ron Kirk, said on Wednesday.

The ruling, by the World Trade Organization, seems certain to fuel concerns in Congress about whether the Pentagon should consider the subsidies in deciding whether to award a $40 billion contract for refueling tankers to Boeing or to the European company, Airbus.

Boeing, based in Chicago, has long contended that the subsidies helped Airbus vault past it in 2003 to become the world’s largest plane maker.

The 1,200-page ruling concluded that Airbus received subsidies — in the form of government loans at below-market interest rates — to produce its six best-selling models, and the trade panel recommended that steps be taken to withdraw the subsidies.

For the American side, the biggest finding was that many of the loans from European governments to help Airbus develop the A380 superjumbo jet amounted to “prohibited subsidies.” The panel found that the loans were expected to aid export sales, and it said those subsidies should be withdrawn in 90 days.

The ruling also found that Airbus had also received subsidies that helped it develop and sell its A300, A310, A320, A330 and A340 models.

The trade panel concluded that without the government aid, it “would not have been possible for Airbus to have launched all these models, as originally designed and at the times that it did.” It also said that if Airbus had had to find commercial financing, “the increase in the level of debt Airbus would have accumulated over the years would have been massive.”

Boeing’s chief executive, W. James McNerney, said in a statement that the decision showed that the subsidies “fueled the rise of Airbus” and “continue to provide its products a major cost advantage.”

Airbus said in a statement that it expected European officials to appeal the ruling.

“This final report needs to be read together with the forthcoming interim report on subsidies provided in the U.S. to Boeing,” the E.U.’s trade commissioner, Karel De Gucht, said in a statement. “The E.U. remains committed to a negotiated outcome to the dispute with no preconditions on either side.”

The decision was given to both the United States and Europe three months ago, and the outlines had been reported then. The full report was released for the first time on Tuesday.

The trade ruling does not apply to the roughly $4.3 billion in European pledges of loans to help Airbus develop the A350, a new plane meant to compete with Boeing’s 787 Dreamliner, since work on it had not begun when the complaint was filed.

Boeing executives hope the political pressure created by the subsidy ruling will prompt Europe to reduce those loans.

Timothy Reif, the general counsel to the United States Trade, said Mr. Kirk, “has made clear that he would be very disappointed if any member states moved forward with disbursing aid for the A350.”

Mr. Reif also indicated that the United States was not overly worried about the possibility of being found, in turn, to have subsidized Boeing, as the European side has alleged.

“We feel confident in the facts,” he said. “Regardless, the cases are qualitatively different.”

Brian Knowlton contributed reporting.