WTO finds Boeing also had unfair advantage

CHICAGO — Boeing Co. received billions of dollars in illegal government subsidies, including incentives from Kansas, a panel of the World Trade Organization determined.

The WTO report is confidential and was released Wednesday to U.S. and European trade officials. People who had been briefed on the ruling described the results to the Chicago Tribune. It is the first ruling in the second of dueling trade cases filed by the U.S. and European Union against each other in the past decade, alleging that aircraft manufacturers had received unfair government support.

People briefed on the preliminary WTO report said the trade court panel determined that Boeing received market-distorting research and development aid from NASA and the Defense Department, tax-related export subsidies as well as tax incentives from Illinois, Kansas and Washington.

Chicago-based Boeing would ultimately be required to repay any incentives determined to have had an adverse effect on competition for the European Union, which brought the trade litigation, or Airbus, sources said.

But it could be years before the finding against Boeing is made final. The WTO panel must first file a final report, which Boeing would have the right to appeal. In the meantime, European officials are pushing the U.S. to drop the costly WTO litigation and to negotiate a new trade treaty spelling out permissible aid for aircraft manufacturing.

As diplomatic officials digested the ruling Wednesday, sources disagreed on the degree to which Boeing benefited from the aid, barred by international trade rules.

Also uncertain: Whether the finding was as sweeping as the court's determination this year that France-based Airbus benefited from about $20 billion in illegal subsidies, including $15 billion in below-market-rate launch aid in developing most of its commercial jetliners.

Boeing, in a statement made before the WTO report was issued, claimed that none of its incentives had "the market-distorting impact of launch aid nor even approach the sheer scale of the European subsidy practices."

"It's nothing comparable to the European launch aid," said Loren Thompson, analyst with the Lexington Institute, a think tank whose clients include Boeing. "I think you would have to view this as a partial victory for Boeing."

However, others noted that the illegal subsidies provided to Boeing also totaled in the billions and that the panel sided with the Europeans on all of their main claims.

"Today's ruling provides us with the second half of the story," said a European Commission official, who spoke on the condition that he not be identified since the report is confidential. "The EU has said all along that only negotiations at the highest political level can lead to a real solution, and we hope that today's report provides momentum in that direction."