Labor & Employment Law

WTO Rules Airbus Subsidies Are Illegal

By James Parks

The World Trade Organization (WTO) today confirmed what U.S. workers and aerospace manufacturers have been saying for years: The subsidies the European Union (EU) and its members give to the Airbus are illegal. 

In a decision released today, a WTO dispute panel found that $20 billion in aid provided by certain EU nations for new Airbus aircraft over the past 40 years, as well as other subsidies, caused adverse effects to the interests of the United States aerospace industry and therefore violated WTO rules.

About a third of Airbus?s development costs come from European governments in the form of loans that are repaid with interest only if the aircraft is a commercial success.

The 1,050-page report on Airbus was published today by the WTO on its website. Broad outlines of the report have been known since March when a preliminary ruling was sent to the parties involved. Click here to read the full report.

The ruling is significant because European-based EADS, which builds the Airbus, is locked in a competition with the U.S. aerospace company Boeing for the Defense Department?s $35 billion tanker contract.

When the preliminary ruling was issued in March, Machinists (IAM) Vice President Rich Michalski said:

The WTO decision proves, once and for all, that European governments have been tilting the playing field in Airbus’s favor. It’s time to tilt it back. American workers and taxpayers deserve a level playing field when the Pentagon bids out defense contracts.

Today at a Capitol Hill press conference, Rep. Jay Inslee (D-Wash.) said Congress should require the Air Force to consider illegal subsidies in the tanker competition. The House passed Inslee?s bill to that effect earlier this month, and the Senate may take up the bill after the July 4 recess.

Today’s announcement validates what we have been saying for quite some time, massive illegal subsidies to Airbus have distorted the market and given Airbus an unfair advantage that is costing American jobs. If this unfair advantage is taken into account, I know American workers and manufacturers will be able to make the best product for the best price and offer the best deal for the American taxpayer.

The contract for the tanker was rebid after the Government Accountability Office (GAO) in 2008 upheld Boeing’s protest of the original contract award. First, EADS and its partner Northrop Grumman said they were dropping out of the bidding. But this spring, EADS announced it would bid alone for the contract.

If Boeing receives the contract, it would create at least 50,000  jobs, save taxpayer dollars and protect fair trade laws. But if EADS wins the contract, most of the jobs would be in Europe. The few thousand jobs created here under an EADS contract would likely be low-paying assembly jobs with no union representation.

U.S. Trade Representative Ron Kirk said the ruling is an important victory that

will benefit American aerospace workers, who have had to endure watching Airbus receive these massive subsidies for more than 40 years. These subsidies have greatly harmed the United States, including causing Boeing to lose sales and market share. Today?s ruling helps level the competitive playing field with Airbus.

In a recent report  Loren Thompson of the nonpartisan Lexington Institute says European governments have given Airbus the equivalent of $200 billion to help capture the global aviation market. And it has worked. Two decades ago, U.S. aviation manufacturers like Boeing provided 85 percent of the market. Today, European companies control most of it.

Full post as published by AFL-CIO NOW BLOG on June 30, 2010 (boomark / email).