WTO Rules Some U.S. State Support for Boeing Illegal

Subsidies totaled $5.3 billion -- $2.6 billion paid through NASA and $2.7 from Washington, Kansas and Illinois

The World Trade Organization on March 31 partly upheld an EU complaint against U.S. state support for Boeing, saying that at least $5.3 billion in aid for the aircraft maker were illegal subsidies.

Both the European Union and the United States claimed victory, with Brussels slamming Washington's subsidies, while the U.S .hailed the WTO for finding that state aid for Boeing was far less than that paid to European rival Airbus.

In a 900-page report, the WTO panel found that on one key issue "the effects of the NASA and DOD (Department of Defense) aeronautics R&D subsidies are significant price suppression, significant lost sales and threat of displacement and impedance of exports from third country markets" in the product category of 200-300 seat wide-body aircraft.

The amount of subsidies paid through NASA were worth $2.6 billion over 1989-2006, said the arbitrators, who added that those paid through the Department of Defense research and development program were "unclear."

The WTO also found against tax breaks given by the states of Washington, Kansas and Illinois, as well as on the Federal level, saying that these were subsidies. They reached $2.7 billion.

Washington "now finds itself with a crystal clear ruling that exposes its long-running multi-billion dollar subsidization of Boeing through federal and state programs as illegal," EU Trade Commissioner Karel De Gucht said after the WTO announced its findings. "These subsidies have resulted in substantial harm to EU interests, causing Airbus to lose sales, depress its aircraft prices and unfairly lose market share to Boeing."

"The detrimental costs to EU industry from this lengthy and onerous subsidization run into billions of euros."

De Gucht added that the EU was to "call on the U.S. Government to take the appropriate steps that may assist to achieve a mutually agreed solution to this dispute."

However, in Washington, the U.S. government and Boeing claimed a moral victory, saying that the amount of illegal subsidies paid to the U.S. aircraft maker is much less than that paid to European rival Airbus.

"Today a WTO panel confirmed what we have been saying for the last 20 years -- that the WTO-inconsistent subsidies that the Europeans gave to Airbus dwarf anything that the U.S. government has done for Boeing," U.S. Trade Representative Ron Kirk said.

Copyright Agence France-Presse, 2011

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