WTO panel condemns aid to Airbus

Says Airbus was beneficiary of illegal subsidies.

A key panel of the World Trade Organization (WTO) today issued a final but mixed ruling in the biggest civil aircraft trade dispute between the US and the European Union (EU), pronouncing that France-based Airbus was a beneficiary of some illegal subsidies inconsistent with global trade rules, analysts said.

The dispute settlement panel also did not fully side with the US over its numerous claims on behalf of Boeing, disagreeing with Washington on certain aspects of subsidy payments provided to Airbus by its member states.

In a ruling close to 1,000 pages and issued confidentially to the two parties — the US and the EU — the panel upheld a major charge that the EU member-states — France, Germany, Spain, and the United Kingdom — did provide trade-distorting subsidies in the form of “launch aid” loans to Airbus in the development of its passenger jet fleet.

Significantly, the panel ruled that the launch aid provided by the EU member-states to Airbus for the development of A380 super jumbo jet, as well as the A340-500/600 long-range jet, amounted to prohibited export subsidies.

Consequently, EU will have to withdraw those aspects relating to prohibited subsidies without further delay. The panel also found fault with the EU members for resorting to ‘actionable subsidies’ by offering soft loans at zero or low interest rates to Airbus for developing and marketing its passenger aircraft. These subsidies tend to undermine the exports of another company.

The panel also offered some relief to the EU member-states when it upheld aspects relating to reimbursible launch investment. Airbus claimed it won on major aspects raised by the US.

When the US raised the dispute over five years ago, it alleged that the EU had subsidised its “infant” aerospace industry for more than 35 years — actionable through the WTO because the benefits end up primarily as export aid. Former US trade representative Ambassador Robert Zoellick, who launched the dispute against the EU, said Airbus sold more large civil aircraft than Boeing because of these subsidies.