It seems that Northrop Grumman is siding with the European Commission and EADS/Airbus rather than the U.S. government on the dispute over the massive amounts of subsidies that European governments have poured into Airbus for decades.

At least we’ve noticed statements in the press the past few weeks (attributed to Northrop Grumman) that the government “loans” provided to Airbus for A330 development have been repaid, with interest.

The impression that Northrop is attempting to give of the subsidy dispute – that the dispute is much ado about nothing – is highly misleading and, frankly, a slap at the U.S. Trade Representative (USTR) which has worked tirelessly to end an illegal, market-distorting trade practice and level the international playing field for American companies and their workers. Northrop’s reported statements also are a surprise to us, given that Northrop supported the U.S. case against European launch aid for Airbus when it chaired the Board of Governors of the Aerospace Industries Association in 2006.

Here are some facts about European launch aid from Ted Austell, Boeing vice president for trade policy.

“The complaint that the USTR has brought against European launch aid makes a very compelling case that this assistance, no matter what it’s called, violates the WTO Agreement on Subsidies. These so-called loans carry terms that no business would likely obtain from commercial lenders. That’s why Airbus has gotten a significant amount of the financing for each of its product launches from government sources rather than commercial lenders.

“Those government loans carry below-market interest rates, and because of the extent of European government involvement in these product launches, Airbus is able to secure more favorable credit ratings and therefore less expensive loans from private lenders for the balance of its funding needs.

“Perhaps most important of all, the terms of the government loans do not require Airbus to repay the billions of government dollars it has received in accordance with a fixed schedule like you or I would have with a bank if we took out a mortgage on a house. Airbus repays the money only as it achieves certain sales and delivery targets that the company itself defines. That gives Airbus tremendous financial flexibility and a very big competitive advantage when it comes to pricing its products. It also gives Airbus a huge security net since it does not need to fully repay the loans if a product proves unsuccessful in the marketplace. In fact, USTR has presented evidence to the WTO that some loans for the A330 have been forgiven outright.

“The bottom line is that these are non-commercial loans, and as such are a subsidy in the view of USTR and Boeing. We both believe that the WTO panel handling the U.S. complaint will reach the same conclusion when it issues its ruling later this year – a ruling that members of Congress will be watching closely.”

For a summary of the U.S. case against the billions of dollars of illegal subsidies provided to Airbus for all of its products – the A330 included – click on the link below. It will take you to the official USTR web site.

http://www.ustr.gov/assets/DocumentLibrary/FactSheets/2005/assetuploadfile486_7766.pdf