WTO Ruling Vindicates Boeing

The world's preeminent trade body ruled on March 31 that a European complaint against the United States alleging massive commercial-transport subsidies was largely unfounded.

The 2005 complaint had claimed Chicago-based Boeing received about $24 billion in prohibited or actionable subsidies from various levels of government. However, the World Trade Organization identified only $2.7 billion in improper subsidies that have not been remedied, or about 11% of the amount the original European complaint alleged. An earlier tax subsidy benefiting the American company was withdrawn five years ago.

The finding stands in stark contrast to a previous WTO ruling that Boeing's European rival Airbus had benefited from over $20 billion in prohibited or actionable subsidies -- subsidies without which the company probably could not have introduced most of the airliners it currently sells in global markets.

The two cases thus largely vindicate the contention of Boeing executives that Airbus has engaged in a pattern of predatory trade behavior over a period of decades unwarranted by any corresponding benefits given to Boeing.

In fact, the total value of improper subsidies the WTO found Boeing to have received amounted to less than the value of a single wide-body airliner per year during the period in question. Improper subsidies given by European governments to Airbus during the same period were over 700% greater.

Ruling's Impact on Airbus/EADS Far Greater

European officials were quick to argue that the fact Boeing received any improper subsidies was evidence of moral equivalence between the world's two leading producers of commercial airliners. However, the much larger scale of the European subsidies means the material impact of the rulings on Airbus will be far greater.

It must now decide whether it is going to convert billions of dollars in improper payments for development of the A380 super-jumbo jet into a more conventional (and expensive) loan at commercial rates, or flout the findings of the world's top trade panel.

It also must decide what to do about government subsidies received to develop a competitor for the Boeing 787 Dreamliner; those subsidies are not covered by current rulings, but they clearly would be found illegal in light of what the trade body has said about subsidies on other Airbus programs.

Boeing, in contrast, is barely affected at all by the March 31 ruling -- which isn't surprising, since it has never relied on government subsidies to support commercial product development.

Loren B. Thompson, Ph.D., is chief operating officer of the Arlington, Va.-based nonprofit Lexington Institute and chief executive officer of Source Associates, a for-profit consultancy. Prior to holding his present positions, he was deputy director of the Security Studies Program at Georgetown University and taught graduate-level courses in strategy, technology and media affairs at Georgetown. He also has taught at Harvard University's Kennedy School of Government.