WTO upholds ruling that Boeing received illegal US subsidies

The United States and the European Union both claimed victory Monday after the World Trade Organization (WTO) affirmed that Boeing has received illegal subsidies from the U.S. government.

The WTO’s Appellate Body upheld a March 2011 ruling that found the United States provided illegal subsidies to Boeing, the nation’s largest exporter, through defense and space research grants. Aid provided to Boeing in Kansas and Washington state was also found to be in violation.

The latest WTO ruling, which can be enforced with trade sanctions if the aid is not removed, is not as broad as the EU had sought. 

Nonetheless, Boeing’s European rival, Airbus, called the ruling a “sweeping loss for Boeing.” 

{mosads}“Boeing and the U.S. only have six months to end decades of illegal corporate welfare for Boeing and fundamentally change the way the U.S. government supports the commercial aerospace business: a disappointing outcome for those who launched this battle,” Airbus spokesman Rainer Ohler said. “Without compliance, massive sanctions will result.” 

Airbus said the ruling requires the United States to overhaul how the Pentagon and NASA conduct business with contractors.

“Today’s ruling vindicates the EU’s long-held claims that Boeing has received massive US government hand-outs in the past and continues to do so today,” said EU Trade Commissioner Karel De Gucht in a statement. He called on the U.S. to immediately end the taxpayer funding for Boeing’s aircraft.

The Obama administration, however, touted the Boeing decision as a win for the United States because “most” of the programs the EU challenged were not found to be subsidies. 

“This decision is a tremendous victory for American manufacturers and workers — and demonstrates the Obama administration’s commitment to ensuring a level playing field for Americans,” U.S. Trade Representative Ron Kirk said in a statement.

The decision is the latest development in a long-running dispute between the U.S. and the EU over aircraft subsidies.

The WTO has ruled that Airbus benefited from illegal launch aid loaned by European member states.

According to the U.S., Airbus received $18 billion in illegal, subsidized funding, causing Boeing to lose sales of 342 planes. In contrast, Boeing received only up to $4 billion in funds, causing Airbus to lose about 100 plane sales, according to the Office of the U.S. Trade Representative.

Airbus says the WTO has not found that the launch aid is illegal per se, and holds that the loans can continue. 

Boeing said Monday’s ruling shows Europe is providing far more illegal subsidies than the United States. 

“The Appellate Body today slashed earlier findings of harm to Airbus from U.S. subsidies. The decision confirms that in terms of amount, effect and nature, U.S. government support to Boeing is minimal in comparison to the massive European subsidies provided Airbus,” Boeing spokesman Tim Neale said in statement.

In both the Boeing and Airbus cases, the next steps could be new WTO “compliance” panels that would determine whether the illegal subsidies have been dealt with. Negative compliance panel rulings could result in trade sanctions, such as new tariffs. 

Alternatively, both sides could enter into negotiations for a side treaty that could permit both the both European launch aid and the NASA and Pentagon grants.

Washington State Rep. Jim McDermott (D) hailed the ruling.

“The facts are clear: the European Union is overwhelmingly the violator. It is time for the European Union to stop its massive subsidization of Airbus and to let it compete without unfair advantages,” he said. 

Ways and Means Committee Ranking Member Sander Levin (D-Mich.) congratulated the Obama administration on winning the case. 

Another Washington-state lawmaker agreed that the ruling is an affirmation of arguments against Airbus.

“The final resolution of this issue by the WTO Appellate Body appears to confirm what we have consistently argued: that there was no U.S. equivalent to the illegal ‘launch aid’ which the European countries provided to Airbus, allowing it to develop several versions of aircraft that seized market share and took thousands of U.S. aerospace jobs to Europe,” Rep, Norm Dicks (D-Wash.), whose district houses Boeing, said.

— This story was last updated at 3:14 p.m.