Unfriendly skies

After the US went to the WTO complaining about European support for Airbus, the EU counterattacked, citing the ‘massive financial subsidies’ that the US has granted to Boeing.

After the US complained to the World Trade Organization (WTO) about European support for Airbus, the European Union (EU) counterattacked, citing the ‘massive financial subsidies’ that the US has granted to Boeing.

Under the rules of the WTO, the EU and the US now have 60 days to start negotiations to resolve their differences and to find an amicable solution to the subsidies issue. If they fail to do so, the WTO will appoint an independent panel that will make its own mind up.

The US filed the WTO dispute settlement case against the EU citing billions of dollars in unfair subsidies provided to Airbus by European governments.

“This is about fair competition and a level playing field. Since its creation thirty-five years ago, some Europeans have justified subsidies to Airbus as necessary to support an ‘infant’ industry. If that rationalisation were ever valid, its time has long passed. Airbus now sells more large civil aircraft than Boeing,” said US Trade Representative Robert B. Zoellick.

But the folks at the EU don’t agree at all.

“The US move in the WTO concerning European support to Airbus is obviously an attempt to divert attention from Boeing’s self-inflicted decline. If this is the path the US has chosen, we accept the challenge, not least because it is high time to put an end to massive illegal US subsidies to Boeing which damage Airbus, in particular those for Boeing’s new 7E7 programme’, barked EU Trade Commissioner Pascal Lamy.

‘Nonetheless, it is a pity that the US has chosen to go to litigation which could destabilize trade and investment, including that in Boeing’s own 7E7 project.’

The EU claims that the US Government has subsidised Boeing, mainly by paying research and development costs through NASA, the Department of Defence, the Department of Commerce and other government agencies. Since 1992 Boeing has received around $23 billion in US subsidies.

Moreover, the US Government continues to grant Boeing around $200 million per year in export subsidies despite a WTO ruling expressly declaring these subsidies illegal.

The latest and most flagrant violation, the EU says, consists in massive subsidies of about US $3.2 billion, in the form of tax reductions and exemptions and infrastructure support for the development and production of Boeing’s 7E7, also known as “Dreamliner”.