Boeing Subsidies Illegal Says WTO in Win for EU

Boeing Subsidies Illegal Says WTO in Win for EU

Nov. 28, 2016
WTO said that subsidies set up by Washington state to support production of Boeing's 777X commercial jet, were "prohibited" as they encouraged the use of domestic materials, fueling unfair trade distortions.

Subsidies given by the U.S. state of Washington to Boeing (IW 500/9) are illegal, the World Trade Organization said on Nov. 28.

It was a victory for rival aircraft maker Airbus and the European Union. The ruling from a WTO panel is the latest blow in a drawn out trans-Atlantic battle between the aviation industry's two titans, which has seen both Airbus and Boeing score points along the way.

In the decision, the WTO said that subsidies set up by Washington state to support production of Boeing's 777X commercial jet, were "prohibited" as they encouraged the use of domestic materials, fueling unfair trade distortions.

The panel called  for the subsidies to be withdrawn within 90 days.

Airbus was represented by the European Union in the case while the U.S . federal government fought for Boeing and Washington state because companies and regional authorities are not represented at the Geneva-based WTO.

Boeing said it expects the U.S. to appeal the decision.

According to Airbus's own estimates, Washington has given Boeing tax breaks worth $8.7 billion in a scheme scheduled to run through 2040.

Airbus further claims it has already lost $50 billion in sales as a result of the subsidy regime that gives its arch-rival unfair advantages.

"The 777X will not cost Boeing a single dollar to develop thanks to Washington State's taxpayers," Airbus president Fabrice Bregier said.

"This cannot go on any longer. It is time for the U.S .Trade Representative to insist that Boeing cease its anti-competitive behavior," he added.

The WTO, which aims to create a level playing field in global trade, does not have the ability to force compliance with its rulings, but can approve retaliatory measures which in theory can pressure trade manipulators to fall into line.

Calling thes ruling "an important victory for the EU," the bloc's trade commissioner Cecilia Malmstrom said she expected the United States "to respect the rules, uphold fair competition and withdraw these subsidies without any delay."

The EU has meanwhile also been reprimanded by the WTO during the tit-for-tat conflict between Airbus and Boeing.

In September, a WTO panel found that Brussels had not respected a 2011 ruling ordering it to take steps to withdraw several support and subsidy programs for Airbus.

The WTO did not put a value on those programs but Boeing said they amounted to $22 billion worth of illegal support for Airbus development and sales, mostly in subsidized loans.

The EU has appealed that decision, insisting that the subsidies in question had in fact been discontinued.

Meanwhile, a separate 2012 WTO ruling on benefits Boeing received from federal, state and local governments in the U.S. remains a source of dispute, with a report on the issue due out in the coming months. 

Copyright Agence France-Presse, 2016

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