May 7, 2018, © Leeham News: The World Trade Organization resumes action in the European Union appeal of an adverse ruling in the Airbus illegal subsidies case filed by the US years ago, at Boeing’s behest.
This column appears at the start of the business day in Europe, before the WTO opens its hearing today. By the time the US wakes up in New York for business, today’s hearing will be over. The WTO announced today’s hearing a week ago and initially a decision on the appeal was expected, but it may not come until later this week or next.
Based on history, the WTO will probably affirm earlier decisions that Airbus benefited from illegal subsidies and hasn’t yet cured the violations (ie, repaid the subsidies). Just how sweeping this will be is a matter of speculation.
Throughout the long-running dispute, now in its 14th year, Airbus has been on the losing end of the US complaint at least on some level. The European company has won on some issues and lost on others, but the WTO found that Airbus received subsidies from EU states that violate WTO rules.
The spin from Airbus and Boeing will be along historically predictable lines.
Airbus will say any loss isn’t so bad and just wait until the Boeing case comes down in a few months. Boeing will hysterically declare total victory, call Airbus the devil incarnate and demand crushing tariffs.
The spin is tiresome.
All along, Airbus claimed its EU member state support merely offset the US federal and state subsidies or research and development support received by Boeing.
Yes and no.
The WTO did find Boeing received support illegal under WTO rules, but the amounts were always in dispute. Boeing claimed Airbus benefited from $25bn in illegal aid, a figure Airbus called absurd. In the counter-complaint, Boeing received $3bn-$4bn in illegal aid, Boeing said. Airbus claimed the 787 was the most subsidized airplane in history (until the 777X, a separate case).
Boeing more effectively conveyed the messaging than Airbus throughout the complaints.
But Boeing’s claim that launch aid was illegal, the underlying thrust of the US complaint, proved not to be the case. How launch aid was implemented, at below-market rates for fees and interest, violated WTO rules, but launch aid itself was not.
Nevertheless, Boeing continued its refrain that Airbus launch aid is illegal.
After the US filed its complaint, the EU filed one of its own. The WTO found Boeing violations and, like Airbus (the EU), Boeing (the US) appealed. This appeal decision is due later this year.
In every previous adverse decision, Airbus’ spin was “just wait until the Boeing decision comes down. It will be worse.”
History doesn’t support that the decisions were “worse,” except in one instance, the 777X, which was overturned on appeal.
Boeing’s reaction to the anticipated ruling is going to be entirely predictable. It’s press release and spin will be along the lines of defeating the enemy in a World War.
It will demand total surrender and penalties for Airbus’ war crimes. As in the past, Boeing will demand tariffs. With Donald Trump in the White House, his war on unfair trade coupled with tariffs declarations, and Boeing CEO Dennis Muilenburg having become Trump’s biggest booster in US industry, you can bet Boeing will press Trump to impose tariffs on Airbus airplanes.
Boeing should know better on the hysterics. History in this case, and the one against Bombardier’s C Series, simply embarrassed Boeing’s hyperbole and hurt its credibility. But Boeing never blinked on the messaging and it’s been shameless throughout.
Boeing’s hypocrisy has also been clear throughout and no doubt will be in this case.
If Boeing were truly concerned about government support for aircraft programs, it should have persuaded the US to file trade complaints against Russia and China for their airplane programs.
The Irkut MC-21 and COMAC C919, which compete directly with the 737, are government programs, pure-and-simple. But nary a peep from Boeing on these subsidized efforts.
(Airbus hasn’t filed complaints, either, but it never wanted a WTO fight in the first place. The EU complaint against Boeing was purely retaliatory. Airbus, however, unlike Boeing, has called for new bilateral agreements on government subsidies for the US, Europe, China, Russia, Japan, Canada and Brazil.)
The Airbus case is ending this month. The Boeing case should come to a close by the end of the year.
It’s about time. It’s long overdue.
The only remaining question is, what will have been achieved?