World Trade Organization Denounces Airbus Business Practices, Compromising Tanker Bid

The world’s preeminent trade body today released a detailed report documenting that European commercial-transport producer Airbus has engaged in predatory, illegal trade practices since it was first established in the 1970s. The World Trade Organization (WTO) said that Airbus has received a range of prohibited subsidies from four European governments which enabled it to unfairly deprive American competitors of market share, causing “serious prejudice” to U.S. interests. The most important tool utilized by Airbus to steal market share was low-cost or no-cost loans euphemistically referred to as “launch aid,” which permitted Airbus to develop a family of airliners much more quickly than it could have as a purely commercial entity, and then market those airliners aggressively against the offerings of U.S. companies.

Two of the three U.S. producers in the market when Airbus first entered subsequently exited the business, at least partly in response to European competition. The sole survivor, Boeing, has never received launch aid and thus operates at a significant disadvantage to Airbus, according to the WTO. European governments have filed their own complaint with the WTO against subsidies received by Boeing, but that action does not allege the existence of launch aid and cites practices common in both Europe and America. The case therefore is unlikely to produce the strong language seen in today’s ruling, which calls on European governments to withdraw most subsidies to Airbus within 90 days.

The WTO ruling has big implications for U.S. trade relations, and the U.S. Trade Representative has pledged to follow up by enforcing U.S. rights under applicable treaties. However, the most immediate impact of the ruling may be seen in the U.S. Air Force’s pending competition to select a new aerial-refueling tanker. Airbus parent EADS and Boeing are offering derivatives of commercial transports as their tanker candidates, and almost all of the $5.7 billion in subsidies that Airbus received to develop its transport has now been ruled illegal by the WTO. Pentagon policymakers have resisted taking those subsidies into account in comparing bids, but that puts them in the position of potentially rewarding illegality on the part of one bidder. Members of Congress will undoubtedly complain that if a U.S. company had engaged in the same pattern of prohibited behavior on the product it was offering, it probably would have been barred from bidding in the first place.