Daily Management Review

Longstanding quarrel of Boeing and Airbus ends up as the US wins


09/27/2016


Airbus Corporation has received billions of dollars in subsidies from the European Union. In 2011, the EU has not fulfilled an order of the World Trade Organization (WTO) to return the funds within six months. This a conclusion is contained in the WTO’s report published at the end of last week. In addition, the WTO decided that the A350 airliner, the main competitor of the Boeing 787 Dreamliner, would never have taken off without the "direct and indirect effects" of subsidies previously given to Airbus.



Julian Herzog
Julian Herzog
Washington considers decision of the WTO as a decisive victory in the conflict between Boeing and Airbus, which has lasted for 12 years. The American side estimated amount of illegally obtained financial aid to Airbus at $ 22 billion. "We have long said that European subsidies were worth tens of billions of dollars in lost revenue to US companies," - said U.S. Trade Representative Michael Froman. "This is an historic decision, the WTO finally calls on the EU and Airbus to account for violation of global trade rules," - said General Director of Boeing Dennis Muilenburg.

If the WTO's verdict remains in force, the United States will have a right to impose import duties on all goods imported from the EU. Washington has already declared that the sum could reach $ 10 billion. According to experts, one of the few ways to avoid the imposition of duty could become agreement of the parties on settlement of the claims. However, such an outcome is unlikely since so far none of the parties has not demonstrated readiness to retreat or find a compromise. The EU representative said that the Commission is carefully studying the WTO’s ruling and is considering an appeal.

The US victory is not full. WTO disagreed with Washington's arguments that support of Airbus aircraft production received from the countries where they are manufactured (France, Germany, the UK and Spain) was a prohibited export subsidy. Airbus believes that in this way the WTO recognized legitimacy of the European practice of providing loans for the production of aircraft, said Airbus’ spokesman.

The conflict between Boeing and Airbus ignited in 2004. The parties accused each other of using prohibited subsidies. In 2010-2011, the WTO determined that both companies received from the state illegal financial assistance worth billions of dollars: Boeing - through state contracts, Airbus - through loans for production of aircraft to be returned after they are delivered to customers. Next year, the WTO should make a decision on similar charges in respect of the US government, to which Boeing could not return the financial assistance, as well as to consider the EU's claim tax on benefits granted by Washington.

source: ft.com






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