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Protecting the global aviation supply chain

Airbus position on WTO dispute and other trade-related topics

A fair and balanced trade environment and an integrated and smoothly-functioning global supply chain is the foundation of the global aviation industry. Airbus’ position has always been: no one wins in a trade conflict and all benefit from open markets and a level playing field.

What Airbus is doing

Airbus is calling on Boeing to come to the table to reach a reasonable settlement on aircraft manufacturing before it is too late. 

 

Trade wars are not inevitable and can be avoided. We need to achieve a reasonable resolution to these disputes to protect the future of the global aviation industry and thousands of jobs on both sides of the Atlantic. I call on Boeing to reconsider its actions before it is too late. We stand ready to reach a fair settlement but we will not be bullied into an unfair one.

Tom Enders – CEO Airbus


John Harrison, EVP, General Counsel, Head of Compliance and Corporate Secretary

Latest statement on WTO disputes from John Harrison, Airbus General Counsel, at the Airbus Annual General Meeting on 11 April 2018:

It is important at this point to say a few words about the WTO dispute between the U.S. and Europe over aircraft manufacturing since we expect further aggressive posturing by Boeing in the next weeks around the release of the latest reports from the WTO, first on Airbus, then on Boeing.

The WTO has consistently ruled that the Airbus loans are less damaging to global trade than the tax breaks and research grants Boeing receives, which have cost Airbus an estimated $100 billion (USD) in lost sales.  The conflict persists because Boeing continues to receive massive grants to fund its programmes, including most recently $9 billion (USD) in 777X subsidies and yet-unquantified support for the 797.  This grab for cash persists even as Boeing demands that European governments unilaterally end their repayable loan partnerships with Airbus. We want to make you aware of our position now before Boeing tries to speak on our behalf: Airbus (and the European Commission) has always sought a negotiated settlement, ideally as a global sector agreement. It has been Boeing which has encouraged confrontation.

The aviation industry relies on a global supply chain. Boeing’s cynical manipulations could destroy this supply chain and the jobs it creates as by undermining fair competition to provide high-performing aircraft at lowest cost. The sad truth is that there is never a winning side in a trade war, just degrees of loss. Airbus has always advocated fair and balanced trade in the aerospace industry in which government support is an integral part because of its development characteristics and the strategic impact of the sector on its technology and economy and jobs.  Airbus will continue to seek opportunities for a global and balanced sector agreement. However, Airbus will also protect its own interest and defend its position to avoid giving its competitors an unfair advantage in a competitive market place.  

WTO issues with Airbus & Boeing – a 12+ year battle in 3.5 minutes

 

In a long-ranging, multi-continent battle before the World Trade Organization concerning commercial aircraft subsidies, there have been lots of complicated arguments and accusations. When billions of taxpayer dollars are at stake, the finger-pointing perhaps is not so surprising. But what’s really behind the battle and what does it mean for global trade, the aviation industry and taxpayers on both sides of the Atlantic? Read less Read more

Q&A

How are modern transport aircraft built?

There is not a single Airbus or Boeing plane in the sky that has been manufactured in one country alone, or without some form of government partnership. No country has a monopoly on the skills or talent required to make the A350 XWB or the Boeing 787, and policies aimed at advantaging one country over others will only serve to damage jobs in the overall industry and create additional costs for consumers. It also assumes that it is even possible to manufacture an aircraft purely in a domestic market.

In the United States, for example, Airbus employs over 2,500 people. It is also the biggest foreign customer of U.S.-manufactured industrial aerospace components. Airbus contributes more than $17 billion (USD) to the American economy annually with its network of U.S. suppliers, making Airbus the largest single customer of U.S. aerospace exports – more than any other company, or even country. These investments support more than 275,000 American jobs. To give another example, our A350 XWB aircraft isn’t simply made in Europe; it is assembled from parts manufactured by companies all over the world.

The wing of the A350 XWB alone includes components manufactured in the United States, Belgium, Italy and the United Kingdom. More than 1,200 American companies, doing their work at locations in 44 different states, have been involved in the manufacture of the A350 XWB. Rather than undermining U.S. jobs, tens of thousands of skilled American workers are helping make the Airbus A350 XWB and other Airbus aircraft.

Airbus has long chosen to broaden its sourcing strategy to take advantage of the most competitive products in the market and in doing so to be present on both sides of the Atlantic, as well as in the rest of the world. When an airline chooses an Airbus aircraft powered with a U.S. engine it actually buys a product with around 40% U.S.-manufactured content. And it is a fact that during production, many components will have been exported and imported across national and jurisdictional lines multiple times.

Why then these trade disputes in aerospace?

To answer this question, we need to go back in time. Since the origins of flight, the United States and Boeing have sought to lead in civil aircraft production. For most of the period between 1960 and 1980, the U.S. enjoyed an effective monopoly where government subsidies played a key role. When Airbus started to develop its products and gained some success in the market, the monopoly gradually vanished to the benefit of a healthier competition offered to airlines and passengers. Public funding support occurred on both sides of the Atlantic, though in different forms: R&D grants and tax breaks for Boeing, repayable loans funding part of the development for Airbus. 

Both sides managed to maintain peace for almost two decades, thus avoiding legal confrontation and trade wars. The 1992 agreement on government support for large civil aircraft signed between the U.S. and Europe permitted Airbus to receive repayable loans up to 33% of the development costs of a programme and Boeing to receive direct grant subsidies up to 3% of the U.S. civil aviation industry turnover. It was not perfect, but it provided a balanced playing field while it was in force.

This agreement remained in place until 2004. When Airbus approached the 50% market share, and for various internal reasons, Boeing lobbied the United States administration to unilaterally abandon the 1992 agreement and launch a trade case at the WTO accusing Airbus of illegal subsidies.

That withdrawal and complaint left the EU with little choice but to respond with a parallel WTO challenge to U.S. government support of Boeing by federal, state and local authorities.

For more than 14 years now, Europe and the U.S. have been engaged in this dispute over aircraft manufacturing subsidies at the World Trade Organisation.

The dispute is complex, with both Airbus and Boeing accused in turn of receiving illegal subsidies. Airbus is accused of receiving low interest loans from the EU member states for aircraft development, which require reform. Boeing has been receiving huge grants from U.S. states and institutions, which are completely illegal under WTO rules. 

To date the WTO has ruled in these cases that the Airbus loans are less damaging to global trade than the grants Boeing receives. However, the U.S. refuses to acknowledge this situation and end its trade distorting grants to Boeing and simultaneously requests the EU and Airbus to unilaterally abandon its legal system of reimbursable loans.

Airbus will continue to robustly defend its position to ensure a level playing field but it is clear that the dispute was started, and has been largely sustained, by the actions of Boeing to protect its previous market dominance. 

What’s happened lately in this dispute?

2018 will be a crucial year, with new announcements expected from the WTO over the long-running disputes.  Some people expect the U.S. to consider the aggressive use of tariffs linked to the aircraft cases. This will have an effect on other sectors of the economy, putting jobs at risk across the world, including in the U.S.

And these are not abstract threats, as Bombardier workers understood during the dispute between Boeing and Bombardier. Boeing, in its attempt to restrict market access to the C-Series in the U.S., threatened the jobs of more than 4,000 people in Belfast. Bombardier is not only a Canadian aircraft company, it is the largest manufacturer and industrial employer in Northern Ireland, whose economy would be devastated if the United States had proceeded with the proposed tariff rise. Fortunately, that case was dismissed by the US Trade authorities and the C-Series aircraft will now fly freely across the entire U.S.

Who wins in this dispute?

There are no winners in these trade disputes, only degrees of loser. The only beneficiaries of aggressive trade confrontation would be new entrants from other nations.

Let’s be clear: it is not in the interests of the U.S. to prolong this trade war. This is not a zero-sum competition between Boeing or Airbus, but rather it’s Boeing plus Airbus that is best for the U.S., and not only for the U.S. For the airlines, having the competitive benefit of two healthy aerospace manufacturers offers better value (whether via competitive pricing or alternative capabilities). For the U.S. economy, having a U.S. supply base that supports both plane manufacturers is inherently healthier and more robust than a Boeing-only monopoly.

It is therefore in the interests of not just European aerospace, but suppliers and consumers globally, that everything possible is done to resist attempts by Boeing to beggar and to bully others.

Is there any way out of this dilemma?

There is no solution for these disputes other than reaching a common agreement for the aerospace industry.

Airbus has always been consistent in seeking a negotiated agreement between the European Union and United States.

A globally negotiated agreement is in the interests of not just the companies involved in trade action today and those they employ directly, but also of suppliers to the aviation manufacturing industry and airlines and consumers everywhere.

For further background please visit our WTO topic page.

Timeline of the disputes

The current disputes have been percolating for years. Recent events have thrown them back in the limelight. Below is a timeline of the key developments.

1992 - The United States (“U.S.”) and the European Communities (now the European Union, “EU”) concluded a bilateral agreement (“1992 Agreement”)

2004 - Boeing prompted the United States to unilaterally and unexpectedly withdraw from the 1992 Agreement and to immediately file a complaint at the WTO over all EU support ever granted to Airbus, including the support that was previously agreed to by the U.S. in the 1992 Agreement. The EU followed suite, filing a complaint against direct support to Boeing in the form of government grants and regional tax breaks.

2010 - WTO and its Appellate Body rule that US and EU received WTO-inconsistent subsidies

2012 - US and EU challenge respective measures taken to comply before the WTO

2016 - WTO panel finds that neither US nor EU have fully complied with WTO recommendations. 

The global supply chain in action

Airbus is not a purely European business. It has a vast and significant supply chain spanning markets around the world to produce its aircraft. 

Disclosure, references and key documents

Airbus has communicated regularly on this issue. The links below lead to interviews, press releases and financial statements that cover trade topics:       

15 May 2018 - WTO confirmed: no prohibited subsidies at Airbus, minor elements of actionable subsidies to be addressed

16 October 2017 - Airbus and Bombardier Announce C-Series Partnership

4 September 2017 – WTO will move on to judge actionable Boeing subsidies to 777X

9 June 2017 - WTO condemns Boeing’s non-compliance and new subsidies

28 November 2016 - WTO delivers knockout blow to Boeing’s record-breaking subsidies with historic ruling

27 September 2012 - Next chapter in eight year old WTO conflict: Boeing’s WTO Default Prompts $ 12 Bn in Annual Sanctions

12 March 2012 - Sweeping Loss for Boeing in WTO Appeal

1 December 2011 - Airbus Reports Full European Implementation of WTO Findings

18 May 2011 - WTO final ruling: Decisive victory for Europe

30 March 2011 - Truth goes public: WTO condemns massive illegal Boeing subsidies

31 January 2011 - WTO ruling: Billions in Boeing subsidies distort competition

8 July 2010 - Statement by Airbus President and CEO Tom Enders in response to the WTO announcement of a further delay of the report in the Boeing subsidies case (DS 353)

30 June 2010 - Airbus alerts on counter case on Boeing subsidies while WTO panel rejects US claims

23 March 2010 - Airbus Statement regarding today's WTO panel report in the U.S. case against the EU

30 May 2005 - Boeing 787 / Trade issues EADS and BAE Systems are supporting a negotiated solution

7 October 2004 - Statement By Airbus On The US Government Request For Formal Consultations At The WTO

  • Previous media statements from Airbus can be found here.

WTO and European Commission statements and releases

Additional perspective on civil aircraft trade and compliance is available from the following links:         

15 May 2018 - WTO rejects vast majority of US claims in Airbus dispute

9 May 2018 - European Communities — Measures Affecting Trade in Large Civil Aircraft

9 June 2017 - EU secures another important win in the WTO Boeing Dispute

22 September 2016 - WTO Issues a Report on EU Compliance with Airbus Case Ruling

22 September 2016 - WTO panel issues compliance report on US challenge to EU aircraft subsidies

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