The World Trade Organization’s confidential final report on European commercial-aircraft subsidies sides with the United States in finding that much of the aid Airbus has received is banned under current trade rules. The report thus confirms a preliminary finding in September that low-cost or no-cost loans used to help launch every class of Airbus planes were illegal under the WTO agreement on subsidies and countervailing measures. The U.S. Trade Representative has argued that without such “launch aid,” none of the Airbus aircraft flying today ever would have been built.
The sweeping victory for the U.S. in the WTO’s final report was anticipated in a Lexington Institute report issued last week, which found that Airbus has used a predatory business strategy to deprive competitors of market share for decades. Airbus issued a statement before the U.S. Trade Representative had briefed the final WTO findings to Congress attempting to minimize their significance. The reality, however, is that WTO has found European governments in violation of free trade commitments, and they therefore must cease the 40-year practice of giving Airbus loans at concessionary rates not available to commercial companies like Boeing
The first big test of whether Europe will comply with the WTO findings concerns billions of dollars in subsidies that Airbus has requested for its A350 competitor to the Boeing 787 Dreamliner. While the A350 was not technically part of the WTO case, the implications of the findings for that effort are quite clear: Europe must stop giving unfair assistance to Airbus, otherwise the United States will impose sanctions. Nearly 20 years ago, Europe agreed to gradually scale back the subsidies it gave to Airbus; however, no such reductions have occurred, and as a consequence the U.S. share of the global commercial transport market has shrunk from 85% to 47%.
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