Black Friday: Airbus Gets The Bad News About Subsidies

Today the World Trade Organization will tell Airbus what everybody already knew: launch subsidies from friendly governments give it an unfair advantage in competing with its American counterpart, Boeing. Airbus will respond with three arguments: (1) Boeing gets subsidies too, (2) the bailout of U.S. auto companies and banks proves that everybody’s hands are dirty, and (3) it’s more important to avert a trans-Atlantic trade war than to penalize Airbus. If U.S. policymakers care at all about the true meaning of the phrase “free trade,” they will ignore these disingenuous, self-serving arguments.

When Airbus delivered its first airliner in the 1970s, there were three American companies building commercial transports and they controlled about 90% of the global market. Today, after 30 years of European subsidies to Airbus, one American company remains — Boeing — and it owns less than half of the global market. That still makes it the nation’s biggest export earner, but you have to wonder what our trade balance and the employment picture in the aerospace sector would look like if Europe had not distorted the market with its subsidies to Airbus.

Anybody who thinks the U.S. government gives Boeing a helping hand in competing with Airbus should review the corporate purgatory it has endured in this decade as key military programs were canceled, earnings tanked and senior executives were forced out. If this is favoritism, then Boeing would be better off with fewer friends in Washington. It’s too soon to say what the WTO ruling means for the Air Force’s pending re-competition of its next-generation tanker, but with the Obama Administration ignoring Mexican and Canadian complaints about U.S. protectionism while backing away from free trade agreements with Columbia and South Korea, it can’t be good news for Airbus.