Manufacturing Subsidies

Sen. Richard Shelby (R-AL) just released a statement on a World Trade Organization ruling where he contends the WTO "confirmed that Boeing has in fact received subsides for aircraft development." The senator, whose state would host a facility run by European aerospace giant Airbus should the company beat Boeing for the Air Force's next-generation airborne refueling tanker, further says:

Today's preliminary ruling clearly states that Boeing was involved in practices prohibited by the World Trade Organization. While the confidential nature of this report will allow Boeing supporters to attempt to spin the facts in the media, it is clear that they can no longer rationally claim that this trade dispute is one sided. In fact, it is quite the contrary.  However, as I have continuously said, we must not allow either report to delay the tanker replacement program or muddy the competition with politics. Our goal must remain the same –- deliver the best, most capable aircraft for the warfighter at the best value for the taxpayer.

As sister publication Inside U.S. Trade reported this summer, the European Union on July 21 notified the WTO that it is appealing virtually every aspect of the June 30 WTO panel finding that EU member states provided subsidies to Airbus. Further:

Sources close to the EU said that, due to the complexity of the appeal, they expect the Appellate Body to take longer than 90 days to review the appeal, which is the timetable outlined in the WTO's Dispute Settlement Understanding. They noted that the appeal of the U.S. cotton subsidies case took 136 days, and the U.S. hormones case appeal took 140 days.

In a July 20 background briefing for reporters, sources close to the EU said it is highly unlikely that the Appellate Body would rule on the Airbus case appeal before mid-September, when an interim ruling is expected in the separate WTO case filed by the EU against alleged subsidies provided to Boeing, the rival of Airbus.

These sources denied that the EU planned to file such an extensive appeal in order to drag out the litigation process. One source said the EU will appeal virtually every aspect of the case because the panel had erred so extensively.

Some sources argue that it is in the EU's interest to drag out the appeals process in light of the fact that the Air Force is expected to decide by mid-November whether Boeing or the European Aeronautic Defense and Space (EADS) company, the parent company of Airbus, will win a $35 billion aerial refueling tanker contract. An EU source denied that the tanker contract played any role in the appeals process.

If the appeal in the Airbus case concluded prior to the issuance of this contract, and if it upheld panel findings that EU member states provided subsidies to Airbus in violation of WTO rules, it would bolster arguments by Boeing supporters in the U.S. Congress that the Air Force should not award the contract to EADS, these sources said.