In the coming months, we are likely to see a number of news articles on the ongoing WTO disputes over subsidies allegedly given by the U.S. government and EU Member States to the two dominant makers of civil aircraft, Boeing and Airbus.

Under the WTO dispute system, there are several stages to the process of releasing decisions, involving confidential "interim" and final reports given only to the parties, followed eventually by a final report circulated to the public.  As a result, observers may have to parse through news reports and press releases in order to get a sense of what the reports say, before we see the full details of the WTO panels' findings.  And then, of course, even when the reports come out, there is still the possibility of an appeal.

Nonetheless, despite all the waiting and the initial uncertainty, the decisions in these cases will have important implications for the future of the Airbus-Boeing market competition and subsidy regimes, the development of other aircraft producers and similar industries, and the WTO jurisprudence for subsidy rules in general.

Airbus and Boeing

Airbus and Boeing have been competing in the marketplace for decades.  For much of that time, they have traded allegations regarding the provision of subsidies by their respective governments.  There have been GATT complaints in the past, as well as negotiated agreements.  However, the current round of complaints, launched in 2004, has ratcheted the dispute up a notch, in large part because of the new, more effective WTO dispute process under which the complaints were brought and the more detailed subsidy rules that now exist.

The upcoming rulings will have an important impact on the resolution of the Airbus-Boeing dispute and the nature of the competition between the companies.  Both sides are likely to win some issues.  However, after weighing and balancing all of the specific findings, it will be possible to make an overall judgment on which side's subsidies have led to a higher degree of violation of the rules.  It is possible that simply having these findings in front of them will cause Airbus and Boeing to re-think their strategy in this dispute, and lead to some sort of compromise.  If the findings alone are not sufficient, the threat of trade sanctions authorized by WTO rules could very well be.  In either case, the rulings could shape the future of the competition between these companies by defining the legality of the subsidies the companies receive.

The Rest of the Aircraft Industry and Similar Industries

Airbus and Boeing are the most recognizable names in the aircraft industry, but there are other players as well.  Canada’s Bombardier and Brazil’s Embraer, for example, make regional jets, and companies like the Florida-based Piper Aircraft make smaller, light jets.  The first two have had their own reciprocal WTO disputes, which remain unresolved.  In addition, Bombardier and Piper have recently been the subject of bidding wars by state and local governments, in the form of tax-break packages to encourage them to locate factories in their areas.  The rulings in the Airbus-Boeing WTO disputes may discuss location subsidies specifically (Boeing, for example, is the recipient of substantial state-aid from the State of Washington) and thus could have an impact on the general use of such subsidies.

China has also recently emerged as a potential participant in the aircraft industry.  The size of the Chinese market alone makes any Chinese entrant a contender to be taken seriously.  The active participation of the Chinese government in the development of this industry makes it even more so.  Airbus and Boeing are no doubt watching what happens in China very closely, and their first-hand experience with WTO dispute settlement in this area will no doubt serve them well in assessing the legality of any Chinese subsidies.
Finally, these kinds of competitive subsidies are common in other manufacturing industries as well.  Companies in these industries should watch the aircraft rulings closely to assess their potential implications on their own subsidies.

WTO Subsidies Jurisprudence

With so many types of subsidies at issue, and claims under a wide range of legal provisions, these disputes are expected to offer some important interpretations of WTO subsidies rules.  The decisions are likely to provide guidance on core subsidy issues such as:  the "financial contribution" and "benefit" aspects of the definition of subsidies; the "specificity" requirement; the two kinds of "prohibited" subsidies, export subsidies and domestic content subsidies; and "actionable" subsidies.  This last issue may be of particular importance, because this is the broad category under which any subsidy can be challenged based on its effect on foreign competitors.  Actionable subsidies require the most complex factual and economic analysis.  There is only limited guidance in this area to date, so more elaboration will be very useful.

In addition, there are a number of more specific elements that these disputes might help clarify.  For example, one difficult aspect of WTO law has been the distinction between challenges to subsidy programs as compared to challenges to actual subsidy payments.  Some of the subsidies rules do not clearly address the distinction, and the issue has been a difficult one in some recent cases.  There is also the issue of how to implement rulings on subsidy measures, as the subsidies rules have a number of special provisions that are stricter than normal WTO obligations, and vary by type of subsidy.

Conclusion

The WTO rulings in the Airbus-Boeing disputes will no doubt be long, complex, and somewhat mixed, with each side winning some points.  It may take a while to sort through all the findings to declare a winner.  However, it is clear that whatever is said will have important implications for the future of the civil aircraft industry in particular, and for the global subsidy regime as a whole.
 
 www.worldtradelaw.net