In a victory for American trade interests, the World Trade Organization rebuked the European Union for issuing government subsidies to European companies, giving them an advantage in international contract bidding. In what is being called a “stinging rebuke,” the WTO charged that the EU’s assistance constituted an illegal export subsidy. They requested that EU figure out a way to help European companies without adversely affecting American companies or discontinue the subsidies altogether.

The ruling has particular significance for American company Boeing, which has been locked in a bidding war for large civil aircraft with a European company receiving these very subsidies, EADS. Boeing, which filed the case in the WTO, contended that EADS was being given an unfair advantage when bidding for American contracts since they were able to undercut American companies; the EU would provide a “loan” to EADS allowing them to bid less, with the agreement that EADS would repay the loan as planes were sold. The result? European companies were able to underbid American companies, take jobs from American workers and send them to Europe. Today, the WTO agreed that this was an unfair practice.

The Wall Street Journal puts it bluntly:

This has been obvious for years to most fair observers, but with the WTO ruling Germany, France, Spain and the U.K. now have a strong legal and political reason to end the practice of lending money to Airbus on easy terms to fund the development of new aircraft. The practice dates to Airbus’s beginnings as an multi-government-owned consortium, but the aircraft maker is no longer a fledgling and now splits the market for large civil aircraft nearly equally with Boeing. With soaring deficits and a debt crisis that is still creating turbulence on the Continent, politicians have better uses for taxpayer money than subsidizing a successful company.

In each of the five individual cases involving Airbus models, the WTO found that these subsidies led to a loss of sales and exports for Boeing. U.S. Trade Representative lawyers stated that the key finding in this case was that without these subsidies, Airbus would not have been able to develop or produced when they were or with their current slate of features. The A-330, the base airplane EADS intends to use for the tanker is, unsurprisingly, one of the aircraft models that the EU subsizided. Boeing has already contended time and again that their plane is superior but had feared that EADS’s unfair competitive advantage would stall their bid, which could mean uncertainty for Boeing’s American workforce.

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The United States Air Force was handed good news on March 23^rd when the World Trade Organization made its final ruling on a complaint brought by the United States Government.  It found that $178B in launch aid given to France-based EADS/Airbus for its family of jetliners was improper and illegal.

Further, the WTO determined that $5B given specifically to provide EADS with an unfair advantage over America’s Boeing to build new U.S. aerial refueling tankers broke trade laws – and the spirit of legal and fair international competition.

That the subsidies were illegal or that EADS/Airbus cheats to win contracts comes as no surprise to trade watchers.  The ruling that they broke laws and put an American company at an unfair disadvantage should remove any obstacles for the Pentagon to move forward immediately with a contract for these much-needed flying gas stations.

Emphasis, “should.”

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Northrop Grumman has announced it will not compete for the contract to build the U.S. Air Force’s new refueling tanker, stating that the specifications of the RFP were unfair. Northrop’s partners in Europe are lashing out at the United States. One French official said this week, “I can assure you that there will be consequences” for the United States. The Euros were planning on using Northrop as the American face of their plane, but the fact remained that most of it would have been built in France and to many observers that seemed like a bad deal for out of work Americans. In fact, EADS/Airbus, who would have actually built the plane Northrop was proposing, was counting on the American taxpayer-funded refueling tanker to help its financial situation.

Meanwhile, an advocacy organization called Build Them Both is urging President Obama to step in “fix” it all. “Build Them Both urges President Obama to step in and – with the stroke of a pen – hire each company to build its proposed new tanker. This will put 100,000 Americans to work, provide the Air Force more tankers more quickly and offer massive taxpayer savings over building only one,” says the group’s spokesperson Carrie Giddins, who is also a Democratic political operative.

Build Them Both, which does not disclose its funders, further argues that the United States should yield to French threats and “European outrage.”

But the “build them both” solution would actually be the worst of all possible ideas. It would, in fact, be a terrible deal for taxpayers. The costs of building two tankers would be astronomical, costing taxpayers more upfront and long term. Designing and building two separate refueling tankers would require two separate sets of specifications. It would also require training two separate groups of pilots and maintenance crews and developing and maintaining distinct resupply networks. Its important to note that Northrop’s partner EADS/Airbus was proposing to build a completely different plane; which would require its own hangars, air base taxiways and landing strips. All of these considerations carry enormous costs.

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