Airbus subsidies trade dispute goes to WTO

1st June, 2005

The United States has re-activated its World Trade Organization (WTO) case against European subsidies for aircraft maker Airbus after talks between the UK and EU failed. The legal action at the Geneva-based trade body over billions of dollars in aid is likely to be the largest commercial dispute in history and will put a severe strain on transatlantic business relations. The breakdown in talks came after the European Union announced that, in a bid to avert a WTO showdown, it had offered to cut “launch investment” loans for Airbus’s planned A350 airliner by around 30 percent.

The EU lodged a case of its own with the WTO last year, arguing that Boeing is effectively subsidized by tax breaks in Washington State, federal contracts for military and space research and support from Airbus has estimated it will cost EUR3 billion (USD$3.74 billion) to develop the mid-size A350. Chief Executive Noel Forgeard has said Airbus is likely to ask for up to EUR1 billion (USD$1.25 billion) in repayable state loans from European governments.

Whatever the precise sums involved, it is clear that there are large direct subsidies to the aviation industry and its customers. Together with the £9 billion pa tax exemptions, such subsidies are fuelling artificially cheap flights and climate change.

AEF publication on aviation industry tax exemptions