The Future of the Airbus-Boeing Dispute
Airbus SE is ready to tell the World Trade Organization that the threat posed to Boeing Co. by its most ambitious program ever, the double-decker A380 jetliner, is so marginal that any U.S.-led sanctions against the European Union over illegal aid should be minimal.
The European company will cite the superjumbo’s slow sales and also contend that state support for the more popular A350 model was only slightly more of a benefit given cheap alternative funding available at the time amid historically low interest rates, its head of litigation Karl Hennessee said in an interview.
Airbus is on the back foot after Boeing last week won the latest in a series of disputes over illegal subsidies for the A380 and A350 spanning more than a decade. The WTO ruled that the Toulouse, France-based planemaker failed to adequately address what amounts to billions of dollars in funding from state backers, opening a route for President Donald Trump’s administration to levy tariffs against EU goods.
The U.S. is expected to begin those proceedings in coming weeks, setting up the next stage of arguments: how much financial damage Airbus’s subsidized jets have done to Boeing. That process could take years, Hennessee said.
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Chicago-based Boeing told Bloomberg that the final WTO ruling makes clear that $9 billion of illegal launch aid to the A380 and A350 caused it real and ongoing harm that will “translate into billions of dollars in tariffs on European exports to the U.S. annually.”
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Airbus is betting its arguments on the A380 and A350 will limit the scale of punitive levies that the WTO arbitrator deems appropriate. The manufacturer is also holding out for a ruling by the trade regulator on a counter-claim that Boeing has similarly benefited from illegal funding for its 777 and 787 wide-bodies that would expose the U.S. to tariffs from the EU, Hennessee said.
Airbus has meanwhile agreed terms with the governments of France, Germany, the U.K. and Spain to roll back subsidies in line with with the WTO’s report, it said Tuesday. The confidential changes amount to “minor adjustments” and the company is confident that it’s now in “full compliance” with the trade body’s stipulations, General Counsel John Harrison said in a statement.
While the WTO has yet to determine to what extent Airbus has benefited from illegal aid, the figure is expected to reach into the billions, whereas Boeing’s exposure could be as little as $377 million, based on previous rulings.
Ultimately, Airbus is hoping to negotiate a settlement with Boeing, Hennessee said.
“We’d rather extend a hand in friendship,” he said. “If we end up with sanctions on both sides, if those are imposed, what are we going to achieve?”
A couple thoughts. First, the bad news for anyone tired of reading Airbus/Boeing panel/Appellate Body reports is that Airbus claims it has rolled back the subsidies to come into compliance with the reports, which could mean an Article 21.5 proceeding to determine whether there really is compliance.
Second, with regard to the Article 22.6 arbitration over the level of nullification or impairment, Airbus says it could take "years," while elsewhere Boeing's lawyer says that "sanctions could be imposed as early as six or seven months from now." It could end up being somewhere in the middle.
Finally, Airbus asks, “[i]f we end up with sanctions on both sides, if those are imposed, what are we going to achieve?” I've always figured the U.S. goal here was to create an imbalance of sanctions, with the U.S. authorized to impose a lot more than the EU, and the resulting leverage used to force changes in relation to EU subsidies to Airbus. I'm not sure if that will work, but I see that as the goal.