Maybe a boon for Boeing

The United States and Boeing have won a significant victory over the European Airbus consortium in a trade ruling that found European governments at fault for giving illegal subsidies to Airbus. These subsidies cost the United States jobs and exports.

But big questions remain unanswered. How they are resolved will determine whether the findings by a panel of the World Trade Organization will actually level the playing field for Boeing.

Airbus has promised to appeal the findings, the next-to-last stage in a complaint filed by the U.S. government in 2004. The gist of that complaint was that since 1969 European governments have provided some $20 billion in subsidized loans to Airbus in a deliberate effort to take sales away from Boeing.

Another WTO panel is expected to report in mid July on a counterclaim by Airbus charging the U.S. government with illegally subsidizing Boeing. But the European case against Boeing is much less compelling, under WTO subsidy rules, than the case the U.S. has just won against Europe.

In its report, the trade panel said it "would not have been possible for Airbus to have launched all of [its] models, as originally designed and at the times it did," without the subsidies. It added that if Airbus had relied on commercial loans, "the increase in the level of debt Airbus would have accumulated over the years would have been massive," making Airbus a "much weaker" company.

Still unanswered is whether the report will make any difference in Boeing's competitive position going forward. That will depend on whether the full WTO requires Europe to end its subsidies for new aircraft and renegotiate some $4 billion in outstanding subsidized loans.

The ruling could affect the fierce fight over a new U.S. Air Force tanker. Some members of Congress want the amount of the subsidy for the Airbus entry to be tacked on to the Airbus bid. The trade panel said Airbus' current flagship, the jumbo A-380, received illegal export subsidies. It competes with the 787 Boeing Dreamliner that will be assembled in North Charleston. Airbus also is planning a new A-350 in 2012 to complete with the 787.

A spokesman for U.S. Trade Representative Ron Kirk warned the United States might seek punitive tariffs if the A-350 gets so-called launch aid.

Thanks to market-distorting aid from European governments, Airbus now has more than half of the global market for passenger aircraft and very deep pockets.

It should be required by the WTO to repay the subsidies it has received and banned from getting any more below-market government financing to launch new aircraft.