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U.S. Calls WTO Boeing Appeals Ruling a Victory; Airbus Says EU Is Winner

World Trade Organization appellate judges sided with the U.S. over illegal government subsidies to Boeing Co. (BA), the U.S. Trade Representative’s Office said. Airbus SAS called the ruling a “sweeping loss” for Boeing.

The WTO ruled in March 2011 that the U.S. provided aid to Chicago-based Boeing through federal research grants and state support in developing aircraft including the 787 Dreamliner. The planemaker’s European rival, Airbus, has said the aid to Boeing cost it $45 billion in lost sales from 2002 to 2006. The WTO will publish its report about 5:30 p.m. Geneva time today.

The WTO’s Appellate Body “rejected claims that the U.S. has provided massive trade-distorting subsidies to Boeing and affirmed a dispute-settlement panel’s report finding that most of the programs challenged by the EU were not subsidies,” the USTR said today in a statement from Washington. U.S. Trade Representative Ron Kirk called the ruling, which hasn’t yet been announced publicly, a “tremendous victory for American manufacturers and workers.”

Airbus said the appellate judges upheld the original finding that Boeing got at least $5.3 billion in illegal subsidies between 1989 and 2006 and was slated to get $3 billion to $4 billion in incompatible future aid based on Washington state tax measures.

‘Outcome Is Clear’

“The Appellate Body has now spoken in both the Airbus and Boeing cases,” Rainer Ohler, an Airbus spokesman, said in an e- mailed statement. “Comparing the core claims made by both sides, the net outcome is clear: Boeing’s cash grants are fundamentally illegal, while the system of loans to Airbus by European governments is legal and may continue. Boeing and the U.S. now will have six months to implement the WTO decision.”

The WTO has also ruled that Airbus received billions of euros in low-interest loans from European Union governments, and the U.S. has asked the trade arbiter to approve sanctions of as much as $10 billion for the EU’s failure to comply with that ruling. The U.S. says the WTO found that the EU gave Airbus $18 billion in subsidies, which resulted in lost market share and lost sales involving 342 Boeing aircraft.

By contrast, the U.S. said today’s WTO ruling put illegal aid to Boeing at between $3 billion and $4 billion and lost Airbus sales of about 100 aircraft.

EU Estimate

The EU has estimated the total amount of aid to Boeing between 1989 and 2006 at $19.1 billion. The amount of damage is important because it is the basis on which a government can request permission to impose a specific level of retaliatory sanctions.

Airbus said the judges’ report confirms the existence of illegal U.S. subsidies to Boeing -- previously identified by the WTO as “at least $5.3 billion” and extended by billions of dollars as a result of today’s decision.

The WTO found originally that the illegal aid included NASA research and development programs worth $2.6 billion between 1989 and 2006 and Department of Defense programs with aid as high as $1.2 billion in the same period. There were also three Washington state tax breaks worth up to $4 billion from 2006- 2024 and foreign sales corporation export subsidies valued at $2.2 billion until 2006.

The U.S. and Europe filed counter-cases at the WTO in 2004 after the administration of former President George W. Bush unilaterally walked out of a 1992 aircraft-aid accord with the EU. Toulouse, France-based Airbus, which had a record 1,419 orders in 2011 to extend its lead over Boeing, delivered 534 aircraft last year while its rival delivered 477.

To contact the reporter on this story: Jennifer M. Freedman in Geneva at jfreedman@bloomberg.net.

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net.

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