On September 15, the World Trade Organization will release interim findings to the parties in its ongoing review of U.S. aircraft subsidies. The case was launched by European governments in response to a prior U.S. complaint that commercial-transport producer Airbus has received prohibited trade subsidies. Although the interim findings are supposed to be confidential, European governments will immediately leak the results to friendly media in an attempt to put their side of the issue in the most favorable light. But that will take some fancy footwork, because the WTO will not find that U.S. aircraft subsidies are anywhere near as massive or predatory as European subsidies.
You don’t need to see the confidential interim report to know that will be the outcome. Anyone who has followed the wrangling between U.S. proponents of Boeing and European proponents of Airbus before the WTO can see that Airbus probably would not exist at all without continuous, trade-distorting subsidies since its inception in 1970. Here’s what the WTO said in its final ruling on the U.S. complaint:
1. “The [European Community] and the governments of France, Germany, Spain and the United Kingdom have, through the use of specific subsidies, caused serious prejudice to the United States’ interests.”
2. “Airbus’ market share is directly attributable to its ability to sell and deliver in the [European Community], and relevant third country markets, large commercial aircraft which it would not have available but for the subsidies.”
3. “Had Airbus successfully entered the large commercial aircraft industry without subsidies, it would be a much different, and we believe much weaker large commercial aircraft manufacturer… The United States’ large commercial aircraft industry, at a minimum… would have a much larger market share.”
The World Trade Organization called on European governments to withdraw prohibited subsidies, especially launch aid that it characterized as “unsecured loans granted to Airbus on back-loaded and success-dependent repayment terms, at below-market rates.” We know that such language will not appear in the interim findings on the European case against U.S. subsidies, because the Europeans did not even allege that such subsidies exist in the United States. Instead, their representatives sought to stitch together a morass of disconnected federal, state and local provisions into a grand conspiracy theory of U.S. aid for Boeing that is transparently false.
For instance, the Europeans portray Pentagon and NASA contracts with Boeing as hidden subsidies, when in fact they are just standard agreements to pay Boeing in return for products or services delivered. The losses that Boeing has suffered on federal contracts where it failed to deliver as specified prove the government isn’t intent on helping the company. The Europeans also complain about modest state-level aid in the U.S. that (unlike launch aid) requires companies to develop and deliver products before receiving benefits — while failing to mention that Airbus parent EADS has tapped such aid in several states. WTO experts are smart enough to see that such measures barely impinge on trade treaties at all, and certainly do not create the kind of market distortions produced by European launch aid. So Airbus will need to be real creative in trying to make the latest WTO findings sound like good news.
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