U.S. Cracks Down On Illegal Airbus Subsidies, Threatens $10 Billion In Retaliatory Action Annually

After seven years of pressing Airbus and the European Union to comply with trade-treaty obligations concerning improper commercial-aircraft subsidies, the U.S. Trade Representative signaled today that the time for talking is nearly over. In a bluntly-worded statement, trade representative Ron Kirk rejected the EU’s December 1 assertion that it had complied with World Trade Organization rules, and threatened to levy penalties of $7-10 billion annually against Europe to compensate for the competitive advantage Airbus has received as a result of illegal subsidies.

The penalties would come in the form of countermeasures that current trade agreements permit when countries have been injured by the unfair actions of trading partners. The World Trade Organization previously ruled that Airbus has received $18 billion in illegal launch aid, mainly in the form of loans at below-market rates, and that in the absence of such aid none of Airbus’ current airliners would have been developed when they were. The launch aid enabled Airbus to steal global market share from U.S. plane-maker Boeing, resulting in the loss of hundreds of billions of dollars in sales and the destruction of many thousands of American jobs.

The trade representative’s assessment of how big countermeasures against the EU should be is based on a recognition that the harm to U.S. companies and workers from the illegal European subsidies far exceeds the original value of the launch aid. The proposed remedy, which is subject to review by the World Trade Organization’s “dispute settlement body,” would be the biggest penalty ever levied by the United States against an unfair trader. The threatened action appears to indicate a hardening of official sentiment against Airbus and the European Union, following years of dissembling and delaying tactics by the company and its E.U. champions.

Kirk emphasized in his statement today that “the United States cannot accept anything less than an end to this subsidized funding” — as called for by the World Trade Organization in its ruling against European trade practices. Although the European Union claimed on December 1 to have complied with the ruling, the trade representative said that illegal subsidies to Airbus have recently been expanded rather than withdrawn. Throughout the seven-year history of the launch-aid controversy, the Bush and Obama administrations have adhered scrupulously to World Trade Organization procedures in pressing the U.S. case. Today’s statement by the U.S. Trade Representative signals that Washington intends to make full use of those procedures in punishing Airbus and the EU for their continuing violation of trade rules.