The Wall Street Journal reports today that European jetliner manufacturer Airbus has walked away from an $856 million “loan” that the German government was offering to help launch the A350 competitor to Boeing’s 787 Dreamliner. Normally it wouldn’t be news that a company has decided to forego financing deemed illegal under international trade treaties, but in Airbus’ case such “launch aid” has been a way of life. The World Trade Organization ruled in a recent case that every commercial transport Airbus currently offers was developed using illegal subsidies, and that in the absence of such subsidies those aircraft probably wouldn’t exist at all.
So it is mildly encouraging that Airbus is taking a pass on German largesse, apparently because the company felt too many strings were attached to the loan. But it has already accepted launch aid for the A350 from three other European countries, so it is far from clear that Airbus will comply with trade treaties in the future. Chances are it is willing to pass up government-subsidized loans today because interest rates are low and cashflow is strong, so finding alternative sources of capital isn’t hard. If market conditions tightened, Airbus would probably return to its old tricks despite repeated warnings from the WTO that it is violating the spirit (and letter) of free-trade pacts.
The reason this should matter to Washington is that any unfair advantage enjoyed by Airbus potentially costs the U.S. thousands of jobs and billions of dollars in export sales. There was a time before Airbus appeared on the scene when U.S. companies dominated the global market for jetliners, but four decades of illegal European subsidies to Airbus ended all that — and drove two of the three U.S. jetliner producers out of the business. Now only Boeing remains, forced to compete against a rival that gets illegal subsidies from foreign governments (Boeing gets no federal subsidies). The good news is that Boeing planes are superior to Airbus offerings in terms of efficiency, safety and passenger amenities; the bad news is that many foreign customers care more about the price-tag than those other items.
Boeing is further hobbled by the ridiculous campaign some free-market ideologues have launched against the U.S. Export-Import Bank. For some reason, these misguided critics think it’s a big deal that America has the same kind of export-credit agency as 60 other countries (including every country exporting commercial aircraft), but it isn’t a big deal that Airbus has systematically flouted free-trade rules to receive quasi-socialist launch subsidies. They keep trying to find a villain at Ex-Im Bank even though it uses no taxpayer money, doesn’t compete with private lenders, and turns a profit each year for the government. The real villains are the European governments that have enabled Airbus to destroy thousands of U.S. jobs by violating trade rules. If Airbus is now rethinking its approach to launch aid, that would be a welcome development.
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