US Challenges Airbus Subsidies
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The United States is aggressively challenging subsidies to Airbus at the World Trade Organization despite the US Air Force giving a $35 billion contract to Airbus parent, EADS.
 US Trade Representative Susan Schwab told Senator Pat Roberts, a Kansas Republican, that she had briefed the Air Force some time ago about the pending US trade case against Airbus at the WTO. She said her agency had no role in the decision to award the contract for aerial tankers to the Northrop Grumman/Airbus team instead of Boeing. "This is a decision done solely by the Air Force," Schwab told lawmakers at a Senate Finance Committee hearing on Thursday. EADS and prime contractor Northrop won the tanker contract last week, enraging US lawmakers and unions who wanted it to be awarded to Chicago-based Boeing.
The European Union and United States are pursuing competing complaints with the WTO over tens of billions of euros and dollars in state support for Airbus and Boeing. The United States accuses Airbus of getting grants and loans at unfairly favorable rates in the form of "launch aid." Europe's trade case against Boeing hinges on the provision of research and development assistance from US space agency NASA and the US Department of Defense. Senator Roberts, whose state has Boeing production facilities, said it defied common sense for one branch of the US government to challenge Airbus subsidies at the WTO while another branch awards the company a contract that would cost American jobs. "This is an outrage," Roberts said. "It truly makes me question our trade agenda."
Schwab told lawmakers the WTO could issue a confidential preliminary decision in the US complaint against EU support for Airbus in April or May. It would be months before any ruling was made public, but intense interest may lead to the decision being leaked. Whichever side loses the case is likely to appeal, pushing a final decision further into the future. The same process would apply to the EU case against support for Boeing, which is several months behind the US case, Schwab said. A ruling in the United States' favor could set the stage for a negotiated settlement, or trade retaliation if European governments refuse to end aid for Airbus and the two sides can not agree on a compensation deal. Schwab said that if the United States wins its case, there would be "opportunities for settlement, opportunities for compensation and if necessary, opportunities for retaliation." Retaliation could take the form of higher tariffs on EU exports to the United States, such as aircraft and aircraft parts, which would raise the cost of making EADS tankers in the United States. "US taxpayers could potentially foot the bill for higher duties imposed on spare parts for the Airbus tanker being finished in the United States. That's quite a catch-22," Roberts said.
Boeing plans to meet Air Force officials on Friday to be briefed on why it lost the contract. Thereafter, Boeing will have 10 calendar days to file a formal protest. The Air Force maintains that it chose the plane that best meets requirements to replace its aging aerial tanker fleet.
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