WTO ruling gives EADS ammunition in tanker fight against Boeing

An interim World Trade Organization (WTO) ruling is giving EADS North America and its congressional supporters ammunition in the fight against Boeing for a multi-billion dollar Air Force contract.

The WTO on Wednesday issued a confidential ruling that concluded Boeing received illegal aid from the U.S. government for the development of its aircraft, according to several U.S. lawmakers. 

The WTO’s interim ruling comes a few months after it issued a public decision backing a U.S. complaint that Airbus, Boeing’s biggest rival on the commercial aircraft market, benefited from subsidies from European governments to launch its new aircraft. The EU is appealing that ruling. 

Boeing and EADS, the defense and aerospace conglomerate behind Airbus, are locked in a bitter competition for a $35 billion Air Force contract to build a new fleet of refueling tanker aircraft. Both companies are competing with modified versions of their commercial aircraft: the Boeing 767 and the Airbus 330. 

Despite the Pentagon’s resistance, Boeing’s congressional supporters are pushing to have the WTO subsidy dispute factored into the tanker competition. 

Boeing’s supporters used the WTO ruling against the EU to make the case for pending legislation that they argue would even out unfair advantages that Airbus would have over Boeing. 

EADS North America on Wednesday argued that the WTO’s new ruling underscores that international trade disputes should not be factored into the competition for the Air Force tanker. 

“The report clearly validates the Department of Defense’s position, namely that ongoing commercial trade disputes between allies are irrelevant to defense acquisitions—including the KC-X tanker competition,” EADS spokesman, Guy Hicks, said in a statement Wednesday. “This definitive finding by the WTO only reinforces the Department’s position.”

Sen. Richard Shelby (R-Ala.), a defense appropriator and strong EADS supporter, warned that the WTO reports should not delay any deliberations related to the tanker program. EADS plans to assemble the tankers in Mobile, Ala., if it wins the contract.  

“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,” Shelby said in a statement Wednesday. “However, as I have continuously said, we must not allow either report to delay the tanker replacement program or muddy the competition with politics.” 

Boeing’s congressional supporters are firing back, arguing that the findings of U.S. government subsidies to Boeing cannot be compared to those received by Airbus. 

“The alleged U.S. subsidies of standard economic development tools pale in comparison to the systematic EU strategy to take over the aviation industry,” Sen. Sam Brownback (R-Kan.) said in a statement. “I am convinced that we must account for illegal subsidies in defense procurement programs, particularly in the case of the new KC-X [tanker] competition."

Sen. Patty Murray (D-Wash.), a defense appropriator, said that the E.U. and U.S. cases are not in the same “ballpark or even the same league.” 

“This case was Airbus’ attempt to mask their record of illegal subsidies that have cost Washington state jobs, but it’s clear from today’s ruling that attempt has failed,” Murray said. “The findings in today’s preliminary decision aren’t comparable with the market-distorting, prohibited subsidies that Airbus has been found to use to undercut our workers and hurt our aerospace economy.”  

Brownback and Rep. Todd Tiahrt (R-Kan.) also said that the EU complaints make no claims of launch aid or subsidies for the 767, the plane that Boeing is offering in the tanker competition. The EU complaint alleges that Boeing received more than $20 billion in financial aid from U.S. federal and state governments where it operates. The complaint is widely viewed as the EU’s way of striking back at the United States for filing a case against it for its financial support given to Airbus. 

The Air Force is in the middle of the selection process for the new tanker contract. A contract award is currently expected in November although the announcement date could slip.