World Trade Organization judges are set to issue their first ruling on a European Union complaint that U.S. aid to Boeing Co. was illegal. The decision may lead to a negotiated settlement of the six-year-old dispute between the two largest planemakers.
The confidential ruling, to be handed to the two governments around 4 p.m. Geneva time, marks the latest chapter in a dispute between Chicago-based Boeing and Toulouse, France- based Airbus SAS over government subsidies. The U.S. and the EU filed counter-cases at the WTO in September 2004 that together are the largest ever to go before the trade arbitrator.
“It’s likely that some of the challenged programs will get branded with the scarlet S,” as subsidies, said John Magnus, a lawyer at Miller & Chevalier in Washington and an expert on WTO subsidy rules. What isn’t clear, he said, is that the aid would pass the legal hurdle to be found illegal by WTO rules, he said.
In a June ruling on the U.S. complaint, WTO judges found that Airbus, a unit of European Aeronautic, Defence & Space Co., benefited from the support of European governments, with subsidies for the A380 superjumbo topping the list of violations. The decision raised the prospect of Airbus, the biggest producer of commercial aircraft, having to repay some of the aid provided by the governments.
Today’s report addresses the EU complaint about what it has called “lavish R&D support, as well as Boeing-specific support” from state governments in the U.S. “The support clearly aims at weakening Airbus’s position and competitiveness and boosting that of Boeing,” the European Commission, the EU’s trade authority, said in September 2007.
The EU says Boeing has received $23.7 billion in U.S. Defense Department and NASA research subsidies as well as the state and local funding.
Magnus, who is following the case but doesn’t represent either party, predicted some of the NASA programs and Defense Department contracts, for example, “may be found to be subsidies,” but not meet the hurdle of causing harm to Airbus.
The aid Boeing has received in the U.S. hasn’t had the “market-distorting impact” of the launch aid Airbus got, nor does it “even approach the sheer scale of European subsidy practices,” said Charlie Miller, a Boeing spokesman.
Efforts to resolve the legal dispute by replacing a 1992 accord that sets conditions for government financing for both planemakers have failed. Peter Mandelson, Britain’s former business secretary who was EU trade commissioner when the complaints were filed, said the two governments should have negotiated a solution rather than lodging complaints at the WTO.
The issue has cost “millions in legal fees and still promises no clear-cut solution,” Mandelson wrote in the London- based Times newspaper on Sept. 13. Boeing has used the WTO “as part of a wider plan to discredit Airbus and harm its prospects in the U.S. Legislative threats, retaliatory gestures, verbal attacks by members of Congress on the EU, on individual governments and on Airbus continue to sour the commercial dialogue and impede improved U.S.-EU relations.”
In June, judges agreed with the U.S. and Boeing that loans by European governments constituted unfair aid and that in the case of the A380, the assistance constituted the strongest violation because interest rates on loans were too low and the support was linked to export performance. European governments paid about $4 billion in so-called launch aid for the A380, the world’s largest passenger plane.
The WTO didn’t specify what portion of that figure broke the rules and would require payback. It also said France’s loans for the A380 weren’t considered prohibited.
The EU appealed the ruling in July and the U.S. said last month it was challenging two parts of the WTO decision on which the panel “made mistakes.”