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WTO report condemns Boeing subsidies from US government

A WTO report Monday stated that Boeing violated international rules by receiving subsidies from the US government. The report is the latest stage in the ongoing and acrimonious dispute between Airbus and Boeing for the $1.7 trillion market.


REUTERS - Plane maker Boeing received unfair subsidies from the U.S. government, according to a World Trade Organization report on Monday, and Boeing and its European rival Airbus immediately quarrelled over the scale of the support.

European rival Airbus said the report showed Boeing had received at least $5 billion in illegal subsidies and was only able to launch its 787 Dreamliner with such support. Boeing denied the assertions.

The United States and European Union, both trading superpowers, have been fighting cases against each other in the WTO for more than six years over each other's subsidies for large passenger aircraft.

Monday's report by WTO experts marked the latest stage in the dispute as Airbus and Boeing battle for the $1.7 trillion market.

The report is still confidential, but even Boeing acknowledges that the WTO has backed some of the EU claims. However the two sides disagreed strongly over the amount of condemned Boeing subsidies and how they compared with those given to Airbus.

The findings in the related cases could colour a decision in the coming weeks by the U.S. Air Force on whether to award Boeing or Airbus parent EADS a $25-50 billion contract for refuelling tankers.

Both have supporters in the U.S. Congress, as Boeing would build and finish the tanker in Washington state and Kansas while Airbus would assemble it in Alabama.

Need for agreement

With no end to the litigation in sight, both sides have periodically called for a negotiated end to the dispute, as EU Trade Commissioner Karel De Gucht did in September when an interim version of the report was issued..

His spokesman said on Monday the report confirmed those initial findings, in comments suggesting Brussels was not keen to raise the stakes, or wanted to play down a previous WTO ruling that condemned its own support for Airbus.

"This solid report sheds further light on the negative consequences for the EU industry of these U.S. subsidies and provides a timely element of balance in this long-running dispute," spokesman John Clancy said in a statement.

One EU diplomat said a political solution was preferable.

"Given the state of the global airline industry today, a political agreement is important for both sides of the Atlantic," the diplomat said.

The ruling, like the interim report, was handed only to the parties. It will not be published for several weeks while being translated into French and Spanish.

U.S. Trade Representative Ron Kirk's office said it could not provide detailed comment now as the report was confidential.

"Despite that the EU has publicly commented on the report, at this time we will simply say that the United States is confident that the WTO will confirm the U.S. view that European subsidies to Airbus dwarf any subsidies that the United States provided to Boeing," spokeswoman Nefeterius McPherson said.

Massive subsidies

Airbus said the report would show Boeing had received billions of dollars in illegal subsidies, depriving Airbus of $45 billion in sales, an indication of what the EU could seek in sanctions if the case moved to retaliation.

But Boeing disputed Airbus's figures and said the ruling would not require any change in policy or practice as far as Boeing was concerned.

WTO experts found last year that Airbus received illegal export subsidies from European governments and both sides have appealed against that ruling.

Appeals involving prohibited export subsidies are supposed to be dealt with in 60 days under WTO rules, but this case is so complicated that the WTO's appellate body has said it will not come to a conclusion until some time this year.

Boeing says the research and development grants it received pale into insignificance beside the support for Airbus.

In the Airbus case, WTO judges found the company had been able to launch a series of passenger aircraft only thanks to the government support and called for an end to export subsidies.

Both sides have an interest in clarifying the rules for how governments can facilitate the development of new aircraft in a fair manner.

It could take until much later this year for the appeals process in both cases to run its course, but the two governments, aware that Brazil, Canada, China, India, Japan and Russia have en eye on the market, are eventually likely to negotiate a settlement.

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