Memo Says Boeing, Airbus Could Both Suffer in WTO Case

Boeing Co. and Airbus both would probably see their state aid ruled illegal under global subsidy rules if the conflict goes before the World Trade Organization, a European Commission memo says.

WTO litigation may bring “mutually assured embarrassment,” says the report detailing a Sept. 16 meeting with the U.S. after President Bush threatened a WTO case.

It’s “possible, perhaps likely, that [a WTO] panel may find that they both received WTO-incompatible subsidies” and “both have sinned and should stop,” the report says.

Boeing is pushing the U.S. to file the largest-ever case before the WTO and says European government loans helped Airbus pass it as the world’s largest plane maker last year. Airbus counters that defense contracts as well as foreign and domestic support all amount to aid for Boeing’s new 7E7 model that is double what was available for the new Airbus A380 super jumbo jet.

“Everybody in this is a sinner and has a long record of sinning,” Konstantinos Adamantopoulos, a Brussels trade lawyer, said in an interview. “If both are right, then they’d both see their forms of subsidy disappear.”

French Finance Minister Nicolas Sarkozy said Sunday in Washington that the EU and U.S. should resolve the rift because “it’s in nobody’s interest to litigate.”

“We only bring cases when we think we have grounds for winning the case,” Arancha Gonzalez, a commission spokeswoman who attended the Sept. 16 meeting according to the memo, told a Brussels news conference Monday.

Airbus spokeswoman Maggie Bergsma said the plane maker had no comment. Richard Mills, a spokesman for the office of the U.S. Trade Representative in Washington, also declined to comment. WTO spokesman Keith Rockwell said neither party has contacted the organization about a case and declined to speak about the substance of the dispute.

“We continue to support the U.S. effort to reach a resolution and to use any means necessary to accomplish that,” Russ Young, a Boeing spokesman, said.

Scrapping a 1992 EU-U.S. agreement as Boeing has proposed would leave the two companies at the mercy of WTO rules that lack aid ceilings and offer no protection for research spending on civil aircraft, as does the bilateral accord. WTO arbitrators have already found that government aid doesn’t benefit privatized companies indefinitely and are likely to agree that the fruit of freely available research is a subsidy, trade lawyers say.

The WTO, an intergovernmental organization, could recommend that neither Chicago-based Boeing nor Toulouse, France-based Airbus should receive government aid in the future. If one side failed to comply, the other could ask for permission to retaliate with tariffs against the offender.