By Stephen Kaufman
Washington — The Obama administration welcomed the World Trade Organization’s (WTO’s) June 30 ruling against “launch aid” and other subsidies paid to the Airbus aircraft company from European countries, saying those subsidies are inconsistent with WTO rules and have harmed the U.S. aircraft industry.
In a June 30 statement, Commerce Secretary Gary Locke said the ruling acknowledges that “distortive government subsidies should have no place in the global marketplace.”
The decision, coming after four decades of European subsidies for Airbus, “marks a victory” for small- and medium-sized American companies who produce components for jetliners produced by the Boeing aircraft corporation, he said.
“No industry supports more U.S. jobs through exporting than American aerospace manufacturing,” Locke said, adding that the Commerce Department and the office of U.S. Trade Representative (USTR) Ron Kirk are aggressively trying to sell American products and services around the world to “help us reach President Obama’s goal of doubling exports in five years and supporting 2 million new jobs.”
According to the report released by the WTO panel, more than $20 billion in low-interest government loans to Airbus has been used to develop six models of passenger jets. The WTO ruled that the loans were prohibited export subsidies.
USTR General Counsel Tim Reif explained June 30 that in order to launch a new model of large commercial aircraft, aircraft producers must invest billions of dollars before the first aircraft is delivered or any revenue is received.
To cover some or all of its launch development costs, Airbus received loans from many European governments and the European Union (EU), which then was to be repaid through aircraft sales royalties, Reif said. However, the loan balance was forgiven even if Airbus did not sell enough aircraft, he added.
The WTO panel “found that the launch aid for each and every model of Airbus aircraft was provided free of market interest rate, and therefore constituted a subsidy,” Reif said. “The panel also found that the launch aid and other subsidies that the United States challenged caused adverse effects to the interests of the United States, and therefore are inconsistent with WTO rules.”
The approximately $15 billion in launch aid and $5 billion in other subsidies to Airbus “caused massive adverse effects to the U.S. industry,” Reif said, pointing to the WTO report’s documentation of Boeing’s loss in market share to Airbus in Europe, Australia, China and other countries.
Reif also said the WTO panel concluded that certain launch aid provided for the A380 superjumbo, which made its first commercial flight in October 2007, was “prohibited outright under WTO rules, without the need for showing adverse effect.”
The panel’s ruling confirms that “launch aid and other subsidies significantly distorted the launch decisions that Airbus made, and found that, but for these subsidies, none of the Airbus aircraft models would have been launched when they were and certainly not with the same features,” Reif said.
The United States initiated the WTO case in October 2004 and a panel chaired by Uruguay’s former ambassador to the WTO, Carlos Perez del Castillo, was formed to examine the matter in May 2005. The EU has filed its own WTO complaint that the U.S. government is subsidizing Boeing and a decision is expected in August, according to press reports.
Reif said the United States is seeking the immediate adoption of the panel’s report, and would then see if the European Union decides to appeal the decision.
U.S. Trade Representative Kirk “has made clear that he is prepared to sit down or have his staff sit down with European Commission representatives at any point to work on the problems raised by the panel report,” Reif said.
Airbus developed a new A350 airplane after the WTO dispute was filed in 2004, and Reif said U.S. officials hope that “the clarity of this ruling and its scope is something the EU will take to heart and the member states as they proceed forward” with existing and future Airbus programs.
“It would be very disappointing at this point in time if any of the member states proceeded ahead with disbursing launch aid to the A350,” Reif said.
(This is a product of the Bureau of International Information Programs, U.S. Department of State. Web site: http://www.america.gov)
http://usinfo.americancorner.org.tw/st/eur-english/2010/July/20100707145015esnamfuak0.4017908.html
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