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The WTO makes the case against an Airbus tanker

Post by Patrick O'Callahan on Sep. 19, 2010 at 5:55 pm with No Comments »
September 17, 2010 6:00 pm

This editorial will appear in tomorrow’s print edition.

Is that all you got, WTO?

Americans rooting for the Boeing Co.’s success have been waiting apprehensively for a World Trade Organization’s ruling on whether the U.S. government has been unfairly subsidizing the aerospace company’s commercial jets.

The answer, announced last week, was yes. According to the arbiters of international free trade, Boeing’s jets have benefited from about $5 billion in illegal assistance.

Two billion dollars of that is a 10-year-old, recycled complaint about a federal tax advantage that has long since been rescinded. The remainder, roughly $3 billion, includes NASA money and some state financial incentives, including favorable tax treatment in Washington.

Despite those nine-figure numbers, this is a victory for Boeing. It amounts to the collapse of a countersuit European officials filed in response to the American company’s complaint that Airbus has been unfairly coddled with government money.

In June, the WTO found in Boeing’s favor, deciding that Airbus had been unfairly subsidized by European governments to the tune of $20 billion. Last week, the WTO rejected most of Airbus’ counterclaim that Boeing had gotten $24 billion in illegal assistance from the U.S. government.

Now that the respective claims of Airbus and Boeing have been weighed and decided, it’s time to take a hard look at the European bid for the Pentagon’s $35 billion contract to replace the Air Force’s airborne tanker fleet.

EADS, Airbus’ parent company, has been jousting with Boeing for this huge procurement job for the better part of the last decade. The Air Force has bungled the proceedings twice, most recently in 2008 by making boneheaded mistakes – in EADS’ favor – while evaluating the two companies’ proposals.

The WTO’s decisions this summer have made it abundantly clear that Airbus has received far more unfair public assistance than Boeing.

Boeing’s subsidies, by and large, have come indirectly, as a result of transferring technologies from one division to another. Airbus’ subsidies, in contrast, have mostly come in the form of straight cash to cover the costs of bringing commercial jets to market.

This “launch aid” typically consists of low-interest government loans that don’t have to be paid back until a jet becomes a money-maker. That kind of backing makes it easy to roll the dice against an American company that actually faces market discipline.

The WTO has clearly established that the Airbus 330A – the plane EADS wants to sell to the Air Force – flies on billions of dollars worth of European subsidies. When the Pentagon makes the final decision on which company will build its tankers, that updraft of cheap public money should be a big factor.

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