Time for the EU to End Illegal Airbus Subsidies

By December 9, 2011General, Trade

Manufacturers are appalled by European Union (EU) action purporting to be in compliance with a World Trade Organization (WTO) finding that the European subsidies for the launch of Airbus aircraft are illegal and must cease. 

Despite the fact that the WTO found that every single grant of aid to launch Airbus aircraft was a WTO-illegal subsidy, which includes every aircraft model Airbus produces or has produced, the EU proposes to keep granting those subsidies.

An EU spokesman went so far in a press quote as to say that the new Airbus A350 under development is “… outside the (WTO) Airbus case…” 

WTO dispute settlement rulings are not a historical exercise only looking at the past, but are the guidelines for WTO-consistent behavior in the future.  It is unacceptable that the EU would continue to engage in the same WTO-illegal action of the past, even while it grudgingly faces the necessity of compensating the United States for its commercially-harmful past action.

The NAM agrees fully with the USTR that the United States cannot and will not accept anything less than an end to this subsidized financing.  We urge the full and effective pursuit of all avenues in the WTO to bring about this result.

The WTO could not have said more clearly that government subsidies have no place in the commercial aerospace industry.  This must be a market in which there is a level playing field that is fair and open, free of government intervention.

The WTO’s ruling goes beyond the European subsidization.  It is a precedent that all other WTO members must follow.  Other WTO member nations with commercial aircraft production, or that aspire to such production, must follow the rules.  If the EU does not comply, or is not compelled to comply, there is no way others will follow the rules. 

Moreover, the Airbus case is the largest ever adjudicated by the WTO.  If the European Union, as one of the two largest economic entities in the WTO, fails to comply and fails to stop the subsidization that has been found illegal, the message to smaller countries would be crystal clear – they don’t have to comply either.  If this were to happen it would be the end of the WTO and the global rules-based trading system.  

Frank Vargo is vice president for international economic affairs, National Association of Manufacturers.

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