Aviation

WTO: Boeing got illegal subsidies

SEATTLE — Confirming preliminary reports from September, a confidential World Trade Organization ruling released Monday to the affected parties ruled Boeing Co. guilty of receiving illegal subsidies.

But the total amount of the illegal subsidies cited was a fraction of the amount reported in a parallel WTO ruling last year against Airbus, Boeing's main competitor.

"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," said U.S. Trade Representative spokeswoman Nefeterius McPherson.

The report was released only to the U.S. government and the European Union, and it won't be available to the public or media for two to three months, until it is translated into French and Spanish.

Airbus, however, issued a statement that said the report shows Boeing received "at least $5 billion" in illegal subsidies. Airbus said the ruling, when made public, will show that without those illegal subsidies, "Boeing would not have been able to launch the 787."

If confirmed, that allegation about the funding of the 787 Dreamliner, Boeing's crucial new jet, is certainly serious.

But in comparison, the final public WTO report issued last year on the subsidies to Airbus was a broader indictment. That ruling found illegal the $15 billion paid in advance specifically to fund the development phase of all Airbus jet programs, plus $5 billion in other subsidies.

Furthermore, sources on the U.S. side of the case said in September that about 40 percent of the $5 billion figure for Boeing subsidies pertained to a U.S. tax law that has already been changed. Boeing considers this portion of the WTO finding already remedied.

If that is confirmed when the final report is publicly released, it would leave $3 billion in illegal subsidies that Boeing must answer for, versus $20 billion for Airbus parent company European Aeronautic Defence & Space Co.

In a statement, Boeing called the conclusions of the WTO report "a sweeping rejection of the EU's claims." The EU had alleged that Boeing received some $24 billion in illegal subsidies.

"Today's reports confirm the interim news from last September that the WTO rejected almost all of Europe's claims against the United States," Boeing's statement said. "Nothing in today's reports even begins to compare to the $20 billion in illegal subsidies that the WTO found last June that Airbus/EADS has received."

Airbus took an opposite view. In a statement, Airbus declared the WTO ruling an "excellent result."

In addition to the $5 billion in illegal subsidies already received by Boeing, Airbus said the WTO report points to "more than $2 billion in state and local subsidies that Boeing will receive in the future" that are also illegal.

This is a reference to tax breaks and other incentives to Boeing from the states of Washington and Kansas, which will benefit Boeing through 2024.

It's unclear how the WTO process will affect those future subsidies, or how each airplane manufacturer will have to respond to the other findings.

Boeing claims that a key part of the ruling against Airbus means that "EADS must repay or restructure $4 billion in still-outstanding illegal launch aid subsidies Airbus received to develop the A380" double-decker jet.

In contrast, Boeing claimed that the ruling "will not require any change in policy or practice" on its part.

But Airbus strenuously denies that it will have to pay back any past subsidies and is moving forward to secure new government launch aid for its next jet, the A350.

Airbus welcomed the finding against Boeing and pointed to the likelihood of years of legal and bureaucratic wrangling before any outcome affects how it operates.

"The myth that Boeing doesn't receive government aid is over," said Rainer Ohler, Airbus' head of public affairs. "We expect the WTO dispute to carry on for several more years and as in all trade conflicts, a resolution will only be reached through negotiations."

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