U.S., EU Send Subsidy Dispute to World Trade Organization

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The only certainty in the U.S.-European Union battle over commercial aircraft subsidies that's now before the World Trade Organization is that the outcome is uncertain.

Representatives for both parties--the EU/Airbus and U.S./Boeing teams--assert that they will prevail in the process that may take at least a year to be sorted out. But it may never come to that. Although negotiations to date have gone nowhere, most WTO cases are resolved before the body issues a ruling. And with large commercial aircraft, there's a precedent. The previous subsidy arrangement, struck in 1992, came after the U.S. filed a WTO case.

The U.S. wants Europe to cease issuing below-market loans to Airbus, while the EU wants to stop the flow of research and development funds and local tax relief to Boeing. EU Trade Commissioner Peter Mandelson last week also took aim at financial assistance the Japanese government is providing to its industry working with Boeing, although so far the WTO filing stops short of broadening the case beyond a complaint about U.S. subsidies.

And while the Airbus-Boeing spat may be taking center stage, the WTO could soon find itself facing a second dispute-resolution request in the commercial aircraft realm. Embraer officials are monitoring what financial assistance its rival Bombardier receives for the new CSeries aircraft, for which the Canadian and British governments have pledged more than $700 million in support.