November 29, 2023

Trade Panel Rejects Key U.S. Claim in Airbus-Boeing Dispute

But the panel rejected claims by the United States that state financing for the Airbus A380 superjumbo jet was prohibited under global trade rules, the officials said.

Appeals judges at the trade body, which is based in Geneva, agreed with the initial finding that loans extended to Airbus over the course of four decades did constitute unfair subsidies that had caused Boeing to lose aircraft sales.

But the ruling also appeared to upend what the Americans had considered one of the most crucial parts of the landmark case: namely, that the loans — known as launch aid — that Airbus received from Germany, Spain and Britain for the twin-deck A380 jets were prohibited because governments expected a significant export market for the planes when they granted the support.

Proving that such loans were export subsidies was seen as critical to the United States and Boeing, which have sought to circumvent European plans to finance Airbus’s forthcoming wide-body jet, the A350-XWB, using the same type of financing mechanism. The A350 is expected to enter commercial service in 2013 and is seen as the biggest challenger to Boeing’s 787 Dreamliner, scheduled to be delivered to its first customers this year.

Dating to 2005, the U.S. complaint against the European Union forms the first part of the most complex and voluminous case ever to have ever been brought before the global trade body. The original ruling last year ran more than 1,000 pages and the appellate body’s report is more than 600 pages.

A separate, 850-page ruling by the W.T.O. in April found that Boeing had received at least $5.3 billion in improper U.S. government subsidies to develop its the 787 and other jet models, giving it an unfair advantage over Airbus. That ruling has also been appealed.

Both sides were quick to claim victory on Wednesday.

“The U.S. central claim that Airbus received prohibited export subsidies has been dismissed in its entirety,” Karel De Gucht, the E.U. trade commissioner, said in a statement. “I am particularly pleased with this important result.”

European officials pointed to the appellate panel’s finding that the initial panel erred in its interpretation, saying that the United States had failed to demonstrate that European governments had granted loans to the A380 program specifically because they expected the planes to be sold overseas.

Mr. De Gucht’s U.S. counterpart, Trade Representative Ron Kirk, asserted that the ruling affirmed Washington’s claims that European government loans —which he said totaled $18 billion over 40 years — had been used to support the development of every Airbus model ever produced and helped Airbus vault past Boeing in 2003 to become the world’s largest plane maker.

“These subsidies have greatly harmed the United States, causing Boeing to lose sales and market share in key markets throughout the world,” Mr. Kirk said in a statement.

Timothy Reif, general counsel for the U.S. trade representative, conceded that Wednesday’s ruling had “wiped the slate clean” on the issue of whether launch aid constituted an export subsidy and suggested that issue could now be relitigated.

But he emphasized that the “real fight” going forward would be over financing for the A350-XWB and whether “the Europeans decide notwithstanding this very clear decision that they want to continue to provide launch aid to this aircraft.”

The W.T.O. appeals judges upheld the initial panel’s finding that without government launch aid, Airbus would not have been able to develop any of the major aircraft models that it did, when it did.

The appeals panel also found that in the absence of the subsidies, Airbus would today have a smaller share of the large civil aircraft market.

The judges also found that several Airbus jet programs, including the A380, had received a specific benefit because they were provided at below-market rate of return.

Mr. De Gucht acknowledged that the trade body had found that some past European subsidies hurt Boeing. He insisted, however, that the economic impact of those subsidies was “very limited.”

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