World Trade Organisation (WTO)

WTO rules Boeing subsidies from US state of Washington are illegal

PUBLISHED : Tuesday, 29 November, 2016, 12:21am
UPDATED : Wednesday, 01 August, 2018, 4:10pm

Subsidies given by the US state of Washington to Boeing are illegal, the World Trade Organization said Monday, handing a victory for rival aircraft maker Airbus and the European Union.

The ruling from a WTO panel is the latest blow in a drawn out trans-Atlantic battle between the aviation industry’s two titans, which has seen both Airbus and Boeing score points along the way.

In Monday’s decision, the WTO said that subsidies set up by Washington state to support production of Boeing’s 777X commercial jet, were “prohibited” as they encouraged the use of domestic materials, fuelling unfair trade distortions.

The panel called for the subsidies to be withdrawn within 90 days.

Airbus was represented by the European Union in the case while the US federal government fought for Boeing and Washington state because companies and regional authorities are not represented at the Geneva-based WTO.

Boeing said it expects the US to appeal the decision.

According to Airbus’s own estimates, Washington state has given Boeing tax breaks worth US$8.7 billion (8.2 billion euros) in a scheme scheduled to run through 2040.

Airbus further claims it has already lost $50 billion in sales as a result of the subsidy regime that gives its arch-rival unfair advantages.

“The 777X will not cost Boeing a single dollar to develop thanks to Washington State’s taxpayers,” Airbus president Fabrice Bregier said in a statement.

“This cannot go on any longer. It is time for the US Trade Representative to insist that Boeing cease its anti-competitive behaviour,” he added.

The WTO, which aims to create a level playing field in global trade, does not have the ability to force compliance with its rulings, but can approve retaliatory measures which in theory can pressure trade manipulators to fall into line.

Calling Monday’s ruling “an important victory for the EU,” the bloc’s trade commissioner Cecilia Malmstrom said she expected the United States “to respect the rules, uphold fair competition and withdraw these subsidies without any delay.”

The EU has meanwhile also been reprimanded by the WTO during the tit-for-tat conflict between Airbus and Boeing.

In September, a WTO panel found that Brussels had not respected a 2011 ruling ordering it to take steps to withdraw several support and subsidy programmes for Airbus.

The WTO did not put a value on those programmes but Boeing said they amounted to $22 billion worth of illegal support for Airbus development and sales, mostly in subsidised loans.

The EU has appealed that decision, insisting that the subsidies in question had in fact been discontinued.

Meanwhile, a separate 2012 WTO ruling on benefits Boeing received from federal, state and local governments in the US remains a source of dispute, with a report on the issue is due out in the coming months.