Ruling Made Public On June 30, 2010
Download Full WTO Report Here
WTO “Condemns” Airbus Subsidies
EADS/Airbus Has No Choice But To Fall Into Compliance By Year-End
Airbus Plans To Appeal Ruling
Airbus, Boeing Responses At Footer
Reuters “Factbox” Here
The precise details of the WTO ruling on the USA case DS316 will be made public on June 30, 2010, however it will not change the requirements for Europe, EADS and Airbus to come into compliance with the findings.
Contrary to the information in various outlets and indeed, Airbus’ own PR department, the two WTO cases are independent, have no links whatsoever to one another and both parties have to come into compliance with the respective findings of each WTO panel dealing with each of the two submitted cases. The WTO had previously rejectyed a European request to link the two cases. There will be no “winner” just as there will be no “loser” – all there will be is a set of WTO directives which require adherence by both parties.
Airbus will have approximately thirty days from its public release to file an appeal against the WTO findings from case DS316. The WTO appeals process takes exactly 90 days – meaning that by late October or early November, Airbus (and parent EADS) will have to adhere to the WTO ruling – namely, prohibited subsidies. The process for actionable subsidies is yet to be finalised and contrary to Airbus’ wrongful claims, it will not take years – at best, it will be resolved in a number of months.
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When the WTO rules on the EU case against the USA (DS353), Boeing will have to comply with those findings – but that final decision is still some time off as a result of the EU submitting their counter case. The EU submitted their initial case (DS317) almost at the same time as did the USA but then elected to withdraw their initial WTO file and then resubmit a new file later with additional information – hence the perceived “delay” or time lag between the two cases as a result of the EU/Airbus decision to re-file their case. This is what has led to the timescale differences in the two cases’ outcomes – none of which are the fault of the WTO decision making process.
But be under no illusion, there is no linking between the two cases.
By the end of the year, EADS and Airbus will have to figure out what they’ll do to ensure their compliance with the WTO findings.
“In the event the recommendation is not followed within six months, the Committee shall authorize the requesting Member to take appropriate countermeasures commensurate with the nature and degree of the effects determined to exist,” says the WTO.
Failure to do so would mean Boeing seeking WTO authority to implement retaliatory measures.
Boeing will be hoping that it will not need to file another A350-specific case, but they nor the US Trade Representative have not ruled out doing so.
Whether any new case ruling or existing WTO rules means that the A350 is delayed due to funding issues – this will be something EADS has to be mindful of – its cash position is not favourable and it can ill afford this airplane to be delayed. Given the bleeding of red ink all over the disastrous A400M, the record loss-making A380 and it still has yet to commit serious funding to the $17bn-plus A350XWB program – EADS will have little choice but to curtail its subsidy activity if it wants to avoid a trade war (at worst) or product tariff war from European imports to the United States.
The EU case, DS353, will be released in preliminary form around the middle of next month and may even fall right around the time that the Farnborough Air Show is on.
This document will not be made public until three to four months later, meaning that by late November, Boeing will be in exactly the same position Airbus is in today – it will have thirty days to file any appeal and after the appeals process takes place, by the end of the first quarter next year or the start of the second quarter, Boeing too will have no choice but to conform with the WTO panel findings in exactly the same way.
The crux of this long running dispute has been the persistent aid given by successive European Governments to prop up what essentially amounts to a pan-European jobs club for the guaranteeing of aerospace work on the continent without resorting to the use of commercial lending. In mitigating such open market risk for financially failed products like the A380, the WTO rulings in each case is going to hit Europe harder.
“Aged 40, Airbus is still effectively living at home and so intends to ask European taxpayers to help finance its struggling A350XWB – the most relaunched aircraft program in history,” says Arran Aerospace MD, Doug McVitie.
Airbus claims Boeing gets R&D support, infrastructure support, state and local tax breaks which amount to market distorting assistance in its commercial airplane programs.
Airbus receives everything that Boeing gets – but the difference is that it, unlike Boeing, gets launch aid. Breast may be best, but as the entity enters its fifth decade in the aerospace business, there can be little argument against being weaned off such state aid given the money that Airbus makes from other, more popular selling A320, A330 and A350 jet - unless of course it has an issue with pricing and revenue.
Even so, the end-game to this dispute is near but its implications are wide and far reaching. Other new entrants into the large airplane arena such as China, Brazil, India, Canada and Russia will all have to comply with the guidelines too.
And while transatlantic discussions didn’t help either side reach a settlement in the past, there will be even less opportunity for that to happen now when the rulings will have been issued and also have to be implemented.
Updated: June 30, 2010
Boeing has issued a statement on the WTO ruling on case DS316:
Launch aid for every Airbus program deemed illegal and damaging
‘Prohibited’ A380 launch aid must be withdrawn ‘without delay’
Legal principle set: airplane programs must be funded on commercial terms
Government funding of Airbus infrastructure and R&D programs also ruled illegal
http://boeing.mediaroom.com/index.php?s=43&item=1288
“This is a landmark decision and sweeping legal victory over the launch aid subsidies that fueled the rise of Airbus and that continue to provide its products a major cost advantage,” said Boeing Chairman, President and Chief Executive Officer Jim McNerney.
Boeing Executive Vice President and General Counsel J. Michael Luttig explained the details and implications of the ruling. “Each and every instance of launch aid that the U.S. challenged was held to be illegal,” said Luttig. “The panel said that without the illegal subsidies it received, Airbus would not have the aerospace market share it now enjoys. This ruling will alter the competitive landscape in the aerospace industry forever, forcing Airbus to compete in the marketplace on the same terms as Boeing.“
“Under today’s decision, Airbus must repay the $4 billion in illegal launch aid it received for the A380 or restructure the A380′s financing to proven commercial terms. Likewise, Airbus must abandon its plans to finance the A350 through the use of illegal subsidies,” he said.
“A successful conclusion to this longstanding dispute is now in sight. Within a year, the U.S. government will have authority to act decisively to ensure compliance if Airbus has not entirely restructured the A380 program so that it is financed and funded on objectively verifiable commercial terms,” Luttig said.
WTO Recommendations & Conclusion: Click
Airbus has issued a statement on the WTO ruling on case DS316:
WTO: European reimbursable loan mechanism is a legal instrument
WTO: Neither European launch investment nor other measures caused “material injury” to US interests ruled illegal
“These results are in line with the previous versions of the WTO panel’s findings. Airbus, the EU and the Member States are closely analyzing the report in advance of a possible review by the WTO Appellate Body”, said Rainer Ohler, Head of Public Affairs and Communications of Airbus.
“Only the availability of the report on the parallel case on Boeing subsidies will bring the necessary balance to allow for a possible start of negotiations, without any preconditions,” Ohler added.
