WTO says US subsidised Boeing

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Planemaker Boeing received at least US$5.3 billion (3.3 billion pounds) of illegal US subsidies, the World Trade Organisation said on Thursday in a dispute that shows no signs of an end to years of inconclusive wrangling.

The banned aid included US$2.6 billion of research funding from space agency NASA. But a WTO verdict sparked an immediate row over whether trade judges were right to include more than US$2 billion of further support on the charge sheet against Boeing.

The ruling is the latest chapter in a six-year battle between the industry’s two giants. The spat has already entered the record books as the world’s largest and costliest trade dispute.

The WTO verdict backs some, but not all, of a tit-for-tat legal case over Boeing aid brought by the European Union.

A separate WTO trade panel condemned European support for Boeing rival Airbus in a parallel case last year.

As so often in a row which now extends to 2,000 pages of complex trade court rulings, both sides claimed victory.
“This WTO panel report clearly shows that Boeing has received huge subsidies in the past and continues to receive significant subsidies today,” European Union trade chief Karel De Gucht said.

Airbus, part of European aerospace group EADS, said it had lost US$45 billion in plane sales because of the subsidies. Boeing has made similar claims about the impact of Airbus subsidies.

In Washington, US Trade Representative Ron Kirk said the ruling vindicated a longtime US position that “the subsidies the Europeans give to Airbus dwarf anything that the US government does for Boeing.”

According to the United States, the European subsidies for Airbus faulted by the WTO last year exceeded US$20 billion.

As the latest telephone book-sized report was wheeled out of WTO offices in Geneva, the companies at the heart of the dispute opened fire with another salvo of claims through the media.
“It’s time for Boeing to stop denying or minimizing the massive illegal subsidies it gets,” said Rainer Ohler, head of public affairs and communications at Toulouse-based Airbus.

Boeing acknowledged receiving US$2.7 billion of aid on top of a dispute that has already been aired, but accused its rival of diverting attention from more pernicious types of European aid.
“This WTO ruling shatters the convenient myth that European governments must illegally subsidize Airbus to counter US government assistance to Boeing,” said Michael Luttig, executive vice-president and general counsel at Boeing.

Speaking in private, however, sources involved in the case clashed over whether the US$5.3 billion figure cited by the WTO against Boeing was a fair account of where it went wrong.

The figure includes US$2.2 billion of export assistance under a previous assistance programme known as Foreign Sales Corporations, which the US says is defunct.
“It is interesting but irrelevant,” a US source said.

A European source said Boeing was still living off the benefits of the scheme even though it had been scrapped.

The WTO judges appeared to shy away from going over ground well covered in earlier rulings, saying they had nothing to add.

Both sides can appeal the ruling, as they did when the WTO focussed on Airbus. That appeal verdict is expected next month.

Sources familiar with the case said the EU could appeal as early as Friday in a tactical move aimed at reducing the time gap between the two cases.

The dispute over the US$2 trillion plane market is a running sore in relations between the world’s trading superpowers.

Most recently, it spilt over into a politically charged battle for a contract to supply air tankers to the Pentagon, which was first awarded to Airbus but eventually went to Boeing.

The WTO decisions could help determine how not only Airbus and Boeing, but future competitors in China, Russia, Brazil, Japan and Canada, run their fast-growing aircraft sectors.

Boeing Chairman Jim McNerney hailed what he called a “dramatic victory” in clarifying rules and suggested this would prove helpful as China challenges the Airbus and Boeing duopoly.

However, analysts say it could be years before appeals are exhausted and the case can lead to any trade sanctions.
“Boeing began its complaint with a strong argument, but Europe’s counter-complaint has muddied the waters,” said aircraft analyst Richard Aboulafia of Virgina-based Teal Group.
“At the end of the day it won’t matter much. Both sides will continue to see exactly what they want to see, and will do exactly what they want to do.”

Even if the WTO verdicts against both sides are upheld, both sides disagree over what that would mean for the future.

The WTO has criticised public loans to Airbus, especially for the world’s largest jetliner, the A380 superjumbo.

The United States has warned Airbus not to go back to its host governments – Britain, France, Germany and Spain – for similarly structured loans for its next plane, the A350.



But an EU official insisted the ability of governments to use the loans system in the future had not been altered.