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WTO ruling a moral victory for Boeing

Post by Kim Bradford on Sep. 17, 2009 at 7:54 pm |
September 17, 2009 5:19 pm

This editorial will appear in Friday’s print edition.

The World Trade Organization is reportedly close to announcing what Boeing supporters have long known: Airbus doesn’t play by the rules.

The WTO’s preliminary ruling, according to Washington state lawmakers briefed about it, confirms that launch aid received from four European nations amounted to illegal subsidies.

The trade arbiter reportedly found that European aid had benefited every model Airbus had produced by 2004 – and that the subsidies harmed its U.S. arch-rival, Boeing.

Vindication feels good, but a WTO ruling could be a victory in name only. Theoretically, the United States could raise tariffs or impose other barriers to EU imports years from now when the WTO case is finally settled, but that’s probably unlikely.

The worst that might happen is that Airbus would have to refinance at higher interest rates the $4 billion it received in government aid. The aerospace giant probably isn’t too worried, not with European governments insisting that they will continue to funnel billions into Airbus no matter what the WTO says.

The world has changed a lot in the five years the WTO complaint has been awaiting a decision. Government subsidies and intervention in beleaguered industries have become all the rage – with this country leading the way.

The United States is in a poor position to continue to press such trade disputes. As one trade expert said in the wake of the WTO ruling, “We live in a glass house of global subsidies.”

But lawmakers from Washington and other Boeing-friendly states are urging the Obama administration to punish Airbus in another way: by discounting its expected bid for the plum $35 billion contract to replace the Air Force’s aerial- refueling tankers.

Boeing lost the tanker bid last year, only to see its challenge of the procurement process upheld by the Government Accountability Office. The GAO found the Air Force had essentially sabotaged Boeing’s chances by giving Airbus more information to develop its proposal and then miscalculating the strengths of its bids.

This week, Defense Secretary Robert Gates – who had commandeered authority for the tanker decision last summer – handed the job back to the Air Force. It is expected to announce what kind of plane it wants in a couple of weeks.

Trying to get the WTO ruling factored into the tanker decision is risky. The WTO has yet to decide the Europeans’ counterclaim that Boeing has also received subsidies by way of military contracts and tax breaks. That might come back to bite Boeing supporters who are now pressing to consider such matters in military procurements.

Boeing has had an extra year to retool and prepare for whatever the Air Force throws its way later this month. That could well be all the advantage the aerospace company needs.
We should hope so. The military and taxpayers don’t just deserve the best tanker built fairly, they deserve the best tanker, period.

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