Later this week, the World Trade Organization is expected to come out with a preliminary finding that billions of dollars worth of European subsidies to Airbus — the EU’s largest aircraft manufacturer — are illegal under existing trade law.
During the 2008 presidential campaign, then-candidate Obama regularly assured American manufacturers and blue collar workers that he would enforce our trade laws and protect American jobs.
This WTO ruling may put that promise to the test as the President will have to make a choice between standing up for American workers and the rule of law, or apologizing to his friends in the EU for questioning the validity of their whopping Airbus subsidies.
There is no question that these subsidies have given Airbus a leg up against America’s Boeing on bidding for a contract to replace America’s aging mid-air refueling tanker fleet.
With a 100-billion dollar defense contract at stake and five million manufacturing jobs lost in the U.S. since 2000, President Obama’s decision will be a serious one, and one that sets the stage as to whether his administration will bow to predatory European industrial policy or instead enforce the clear terms of our trade agreements and save American jobs.
The nature of the Airbus subsidies are not in question — they are intentional, blatant, and illegal. In 2002, former French Prime Minister Lionel Jospin flouted his government’s lopsided industrial policy when he told the world: “We will give Airbus the means to win the battle against Boeing.” Jospin’s remarks might be considered the boastful ploy of a politician, but they have been consistently backed up by French and European industrial policies in clear violation of our international trade agreements.
The United States Trade Representative’s 2006 case sued the European Union under WTO rules, challenging the billions of dollars worth of EU “launch aid” subsidies to Airbus. Essentially, EU governments provided no-risk loans to Airbus, which would only have to be repaid if and when an airplane successfully gained commercial success.
This is the same Airbus that has been in the center of bribery, corruption and insider trading cases for years — certainly not your average fair and honest competitor. Its parent company also has widely reported relationships with Iran, Russia and Venezuela — countries that should not be downline recipients of advanced American technologies.
Since Airbus and the EU have already declared their intention to ignore the WTO’s ruling (no surprise there) this is a fight President Obama cannot avoid. If he fails to affirmatively enforce the terms of America’s free-trade agreements, Obama would be surrendering to a European industrial policy specifically devised to harm America’s aerospace industry.
Bloomberg reported last week “the European Union signaled governments will proceed with subsidies for the Airbus SAS A350 [which competes against Boeing’s 777 and 787] even if a pending World Trade Organization decision finds previous aid to the biggest plane maker was illegal.”
Northrop Grumman, Airbus’s minority American partner, still seeks to win a 100-billion dollar defense contract to build the Air Force’s new mid-air refueling tanker. In an almost comical rendition of “don’t mind us, we only play by the rules when we feel like it,” this week the company told reporters that the United States government’s dispute with the EU “has no relevance to and should have no impact on the Defense Department’s tanker replacement program."
Really? Billions of dollars in illegal subsidies have “no relevance” in determining whether American taxpayers should reward the willful violators of our free-trade agreements with a 100-billion-dollar contract?
Those who worry that any U.S. enforcement action would “start a trade war” should remember that the moment the EU, Airbus, and its American partner in the tanker bid stated their intention to ignore the WTO’s decision, they made it abundantly clear that Europe and Airbus are declaring an end to free trade, not the U.S. government or American companies.
When the Pentagon writes its next request-for-proposal for the tankers, President Obama and Congress should order it to calculate the value of the illegal subsidies, and ensure those costs are added to the bid Airbus submits for its tanker platform.
That would make for a fair competition, and send a clear signal to the EU and the rest of the world that while America embraces free trade, it will stand up against those who refuse to play by the rules. It’s exactly the kind of math that the American President should use to protect the American taxpayer and the American worker.