WTO to Rule on Airbus Subsidies in Biggest Litigation in History

Strategic Insights -

The World Trade Organisation (WTO) will now be asked to rule on whether Airbus' rise to the top of the civil aircraft industry was fair or foul, as the US and the European Union (EU) launched the biggest litigation in WTO history. The dispute centers on US allegations that Airbus has benefited from billions of dollars in direct government subsidies, while the EU alleges that Boeing has enjoyed equally lucrative subsidies. The EU will counter that there is no subsidy because the governments have realised commercial rates of return from their investments.

Key Takeaways:

  • The US alleges that Airbus has benefited from $3.7 billion in direct government subsidies for its A380 and $1.7 billion for its A350.
  • The EU argues that the subsidies are not prohibited export subsidies and that governments have realised commercial rates of return from their investments.
  • The EU case against Boeing will focus on benefits totalling $29 billion, including tax incentives and $20 billion in subsidies through research and development funding from the Pentagon and Nasa.
  • BAE, a 20% owner of Airbus, states that Airbus is a net repayer, not borrower, having paid much more than it has received over the last 13 years.
  • EU Trade Commissioner Peter Mandelson rejects suggestions that his handling of the dispute played a part in the breakdown, stating that he "went the extra mile" to avoid escalating the row.
  • A senior US trade official states that the administration is still prepared to negotiate even as the litigation goes forward, but only if they get an assurance that launch aid will be ended completely.

Statistics:

  • $3.7 billion: alleged subsidies for Airbus' A380
  • $1.7 billion: alleged subsidies for Airbus' A350
  • $29 billion: total benefits alleged by the EU for Boeing
  • $20 billion: subsidies through research and development funding from the Pentagon and Nasa
  • 20%: Airbus ownership stake held by BAE
  • 13 years: period over which Airbus has paid more than it has received, according to BAE
  • 35 years: length of time since Airbus was created to challenge US dominance of the civil aircraft industry

Sources:

  • "Airbus subsidy case could go to WTO" by Juliette Jowit, The Guardian, [no date available]
  • "WTO to rule on $15 billion Airbus subsidy case" by Manufacturing Scope, [no date available]
  • BAE Systems, "BAE Systems' statement on Airbus subsidies" [no date available]