Mutually assured embarrassment

4 October 2004 By Marianne Brun-Rovet

Boeing as much as Airbus would face WTO sanction were the US to press ahead with a complaint against the latter’s subsidies, an EU memo says Both aircraft makers receive subsidies of some kind. And Boeing is in little position to take the moral high ground.

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State aid to Boeing and Airbus would be ruled illegal under international subsidy rules were the US to take a complaint to the World Trade Organisation, according to a European Commission memo.

The report, obtained by Bloomberg, argues that WTO litigation would bring mutually assured embarrassment to both aerospace companies. The WTO would probably find that both groups received WTOincompatible subsidies, the memo says.

The US has called for an end to a 1992 EUUS agreement that protects research spending on civil aircraft and sets aid ceilings.

Boeing last month pushed for the US to take its case against the subsidies received by Airbus to the WTO, arguing that European government loans had helped its smaller rival overtake it as the world's largest plane maker last year. Airbus countered that defence contracts and indirect aid for Boeing's 7E7 also amounted to subsidies.

Airbus is receiving $3.7bn in launch aid from European governments to develop its A380 super jumbo. Boeing receives a number of indirect subsidies, including $3.2bn in tax breaks from the state of Washington.

Separately, Darleen Druyun, a former air force acquisition official, admitted last week that she systematically steered air force contracts towards Boeing. Ms. Druyun was fired in late 2003 after it came to light that she negotiated her Boeing job while overseeing the company's airforce contracts.

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