Congressional supporters of European Aeronautic Defence and Space Co.‘s (EADS) bid for the Air Force tanker contract are hailing a final World Trade Organization (WTO) ruling recently released finding fault with U.S. financial support of rival Boeing [BA].
Boeing backers on Capitol Hill, though, downplayed the WTO report, arguing the trade body last year found more egregious trade violations by the European Union as a result of a U.S. complaint about European Union (EU) subsidies to Airbus, EADS’ parent company.
The Air Force is expected to award a contract to EADS or Boeing in the coming weeks for the long-delayed KC-X aerial refueling tanker contract. Boeing supporters in Congress filed a bill last week that would require the Pentagon weigh any unfair advantages competitors for the Air Force tanker contract received through illegal government subsidies.
Sen. Richard Shelby (R-Ala.), an EADS supporter and member of the Senate Appropriations Defense subcommittee, said yesterday’s decision “should end Boeing supporters’ attempt to derail the tanker competition by arguing that the trade dispute is one-sided.”
“As I have said many times before, we must not allow the WTO rulings or political motivation delay the tanker award,” Shelby said. If EADS wins the tanker contest, it will assemble the aircraft in Shelby’s state of Alabama.
The WTO issued a final, yet still confidential, report yesterday in response to the EU complaint about U.S. government subsidies to Boeing, finding that the Chicago-based firm received at least $5 billion in illegal U.S. aid, and is due to receive an additional $2 billion in prohibited state and local aid in the future, French firm Airbus said yesterday in a statement. Boeing, though, said yesterday that the WTO only found fault with $2.6 billion in U.S. aid to it; that’s because some of the $5 billion relates to an export-tax credit that the U.S. government didn’t contest because of changes in U.S. tax law that did away with the credit.
The report regarding Boeing, which followed an interim version issued by the WTO last September, will be released in the coming weeks or months after it is translated to multiple languages (Defense Daily, Sept. 16, 2010). The United States can appeal the report, just as the EU is contesting the WTO’s final finding last June that Airbus received illegal support from European governments (Defense Daily, July 1, 2010).
Nefeterius Akeli McPherson, a spokeswoman for the office of the U.S. Trade Representative (USTR) Ron Kirk, confirmed yesterday her office received a confidential version of the report, but shared no details.
The USTR’s office “will simply say that the United States is confident that the WTO will confirm the U.S. view that European subsidies to Airbus dwarf any subsidies that the United States provided to Boeing,” McPherson said.
The WTO took issue with financial assistance Boeing received from the Pentagon and NASA that, EADS said, allowed Boeing to develop its 787 Dreamliner. However, Boeing said it would have developed that aircraft without the aid.
“Today’s reports confirm the interim news from last September that the WTO rejected almost all of Europe’s claims against the United States, including the vast majority of its R&D claims–except for some $2.6 billion. This represents a sweeping rejection of the EU’s claims,” Boeing said in a statement yesterday. The company said yesterday’s ruling “will not require any change in policy or practice” on its part.
Boeing and its supporters argue the WTO found far more trade violations on Airbus’ part.
“This final ruling today confirms what we have been saying all along: It is EADS/Airbus that has benefitted from illegal subsidies relating to the Air Force tanker competition,” Sen. Maria Cantwell (D-Wash.) argued yesterday.
The WTO ruling regarding Airbus from last June found Airbus received $20 billion in illegal subsidies, including $15 billion in European government launch aid.
Airbus said yesterday the new WTO decision “confirms that Boeing has received massive and illegal government subsidies for many decades, and that they have had a significant and ongoing negative effect on European industry.”
We expect the WTO dispute to carry on for several more years and as in all trade conflicts, a resolution will only be reached through negotiations,” Airbus spokesman Rainer Ohler said. “The myth that Boeing doesn’t receive government aid is over and we hope this sets the tone for balanced and productive negotiations going forward.”