Airline travel has taken a huge economic hit during the global recession, which in turn has decreased demand for new airliners to expand fleets. Thus, aircraft manufacturers are willing to resort to any means necessary in order to boost the bottom line, including accepting large – and perhaps questionable – government subsidies. Reuters reports that World Trade Organization (WTO) judges ruled Boeing, the storied American airline manufacturer, received government subsidies that granted the manufacturer an unfair competitive advantage over European competitor Airbus. The $20 billion in subsidies is being challenged by the European Union, according to sources.
The WTO has pointed at Boeing and Airbus
The WTO judge’s ruling against Boeing is currently confidential and will not be officially released until mid-2011. It has been released to United States and European Union officials, however. It is also known that both Boeing and Airbus have appealed various findings in the case already. Reuters indicates that if initial reports of the WTO ruling are accurate, a negotiated settlement between Boeing and Airbus may occur, as the current state of relations in transatlantic aerospace travel is cold at best. Airbus was previously condemned in June 2010 for taking a sizable cash advance in the form of a government subsidy from the EU.
Research contracts, tax breaks and sour grapes
This may be an example of one power crying foul because they were reprimanded for the very thing that the other power is currently attempting to get away with. According to European sources, Boeing took $17 billion in research contracts from NASA and the Pentagon, and enjoyed $4 billion in tax breaks from the corporation’s home state of Washington. WTO ruled that Boeing broke international trade laws by accepting the contracts and tax breaks, even though the government aid is not technically prohibited. The main point of contention on Boeing’s part is Airbus was essentially allowed to get away with a stern glance, they claim. Thus, Boeing felt their actions in accepting government subsidies were acceptable.
Calls for President Obama’s involvement
EU trade spokesman John Clancy told Reuters that “negotiations at the highest political level” will be the only action that will lead to a long term solution to the feud between Boeing and Airbus. However, U.S. officials have opposed coming to the table unless the EU stops subsidizing the production of the Airbus A350, which U.S. officials feel is very similar to support the WTO has ruled against. In a statement to the press, Boeing maintained its position that they have done nothing to distort the transatlantic aerospace market while continuing to point fingers at EU practices with Airbus.
WTO and Boeing have had better days