Global Biz

WTO rules US aid to Boeing is illegal

(Agencies)
Updated: 2011-04-01 09:45

GENEVA?- The World Trade Organization has ruled that Boeing Co received at least $5.3 billion in prohibited US subsidies to develop and build new planes, according to a finding of a report first issued in January but made public on Thursday.

The WTO trade panel's report came in response to EU complaints, which had alleged that Boeing received almost $24 billion in state subsidies between 1989 and 2006 that violated international trade rules.

The public release of the ruling Thursday_ until now it had only been provided to lawyers and government officials involved in the case _ is the latest development in a six-year contest and will likely go next to a WTO appeals panel.

The EU planned to file such an appeal Friday setting up the next phase in the case, in a tactical move aimed at cutting the time the US would have to prepare its appeal of the ruling.

The move also would help the EU more closely align the timing of its case against Boeing with the parallel but separate case that the US has filed against competing aircraft maker Airbus, a unit of European Aeronautic Defence and Space Co., which has long been subsidized by European governments.

A separate WTO trade panel, ruling on US complaints, also has faulted European governments for providing Airbus with prohibited subsidied. But the EU believes the time lag between the rulings in the two cases has worked to the advantage of the US in a long-running public relations war.

WTO says in its latest ruling that the EU has demonstrated the US gave Boeing "export subsidies that are prohibited" and recommends the US either withdraw them or "take steps to remove the adverse affects."

The report details findings first issued in private to the EU and US in January. It said Boeing received subsidies that broke international rules, such as grants and free use of technology, from NASA, the Department of Defense, and the states of Illinois, Kansas and Washington.

These include $2.6 billion in NASA research and development programs, $2.2 billion in foreign sales corporation export subsidies, and various tax breaks and incentives from several states and cities violated international trade rules. The Defense Department also gave Boeing an improper subsidy, the ruling says, but "the amount of the subsidy ... is unclear."

Other subsidies, such as the $2.2 billion in export tax benefits, are no longer available to Boeing because US law has changed, the panel found.

The ruling says the panel estimated the prohibited subsidies that Boeing received were "at least $5.3 billion over the period 1989-2006."

Airbus, which estimates it has lost $45 billion in aircraft sales because of the subsidies, welcomed the ruling in the EU case. It said WTO had "publicly condemned the United States for giving Boeing massive illegal subsidies that caused Airbus to lose $45 billion in sales."

Boeing, meanwhile, said WTO had "shattered the longstanding European myth that illegal Airbus subsidies are necessary to fend off alleged US subsidies to Boeing."

Boeing acknowledged it got $2.6 billion of illegal US funding, but argued that pales in comparison to $20 billion of "illegal Airbus subsidies."

That interpretation was echoed by the office of the US Trade Representative, which said the subsidies the Europeans give to Airbus "dwarf anything that the US government does for Boeing."

Germany was quick to welcome the WTO's ruling.

"The WTO confirms that the US subsidies were considerably damaging for the European aviation industry, to Airbus in particular," Economy Minister Rainer Bruederle said in a statement Thursday.

Germany said it supports the EU effort to allow both the Boeing and Airbus cases to be judged by the WTO at the same time. As the two giant aircraft manufacturers have dueled, other nations' industries have begun muscling into the business.

"Despite the findings in the WTO's Boeing report, we have to continue working toward a political solution without preconditions," Bruederle said. "From an economic policy point of view, this is necessary for the future of the aviation industries on both sides of the Atlantic, especially in light of the changed global competition."