So the verdict is out. The ruling is in. The World Trade Organization (WTO) has issued its decision in the heated dispute between Boeing
He said ...
If you ask Boeing, it won a clear and convincing victory over its rival Tuesday: "This is a powerful, landmark judgment and good news for aerospace workers across America who for decades have had to compete against a heavily subsidized Airbus. U.S. officials have estimated the commercial value to Airbus of all the government launch aid subsidies it has received at more than $178 billion ..." (emphasis added).
There's a reason I added those italics, though. You see, the key point in Boeing's comments is that the company had to quote U.S. officials stating how much illegal assistance Airbus received -- because WTO officials said nothing of the sort. At least not clearly. So if you're a shareholder of Boeing -- or of key subcontractors like General Electric
She said ...
To the contrary, says Airbus: "70 percent of the US claims were rejected ... The European reimbursable loan mechanism is confirmed to be ... legal ... [and the] Panel refused the US request for remedies [because no] 'material injury' to any US interest" was established. Last and most importantly: "Possible future funding for the A350 is not affected in any way by today's report."
Which appears to mean that the WTO has no problem with Airbus continuing to collect subsidies as it develops an answer to Boeing's 787 Dreamliner -- or at least, that Airbus intends to get those subsidies regardless. At the same time, Airbus plans to challenge Boeing's use of U.S. government "research grants" (that have helped finance the Dreamliner) in a further WTO proceeding to be decided in June.
When you get right down to it, the ultimate upshot of Tuesday's WTO decision boils down to this final statement by Boeing: "We urge [Airbus] to change course and fully comply with the WTO's clear ruling."
Boeing "urges" ... because right now, that's about all it can do.
So it's a tie?
Basically, yeah. For all its bluster, Boeing didn't book a win here. But neither did Airbus. And you don't have to take my opinion on either of those points.
Parsing what little we know about the WTO's "100-page confidential" opinion (a whole lotta talk going on about something almost no one's been able to read, if you ask me), Secretary of Defense Bob Gates explained the verdict to Congress yesterday: "My lawyers tell me that the WTO case ... gives us no basis on which to make a judgment" as to whether Airbus' subsidies should disqualify it from submitting a variant of the Airbus A330 to serve as the Air Force's KC-X refueling tanker.
Yes, you read that right. Boeing tells us the WTO found that European governments gave $5 billion in improper subsidies to fund the A330's development -- and Gates says it doesn't matter a whit. Even after the big WTO decision, the overall situation hasn't changed, and a dispute that's already run six years long has no end in sight.
But after all this time, and all the anticipation leading up to the WTO's verdict, does anyone benefit from the ruling?
Not Boeing (according to Gates). And not Airbus (according to Boeing). But to this Fool's eye, there are at least a few winners: The people who buy Boeing and Airbus planes. The airlines.
I mean, think about it -- whether it's government-backed loans to develop one plane, or outright research grants that make it cheaper to develop another, what does a "subsidy" do? It lowers the airplane maker's costs, that's what. And in the process, it lowers the price the airplane maker has to charge to earn a profit.
To my Foolish eye, this can only be good news for customers like US Airways
So for those keeping score at home: In this game, in the event of a tie, victory goes to the airlines.
Who's the loser?
So now we know who "won" the WTO case. But who lost biggest? For example, some people might argue that taxpayers pay the ultimate burden of these kinds of government subsidies. Others would say that unfair subsidies to companies in one country hurt employment in the other. Cast your vote for the biggest loser, then tell us why in the comments section below. The biggest loser is ...