WTO Sides With Europe On U.S. Subsidies to Boeing

Just today, the WTO dispute settlement panel essentially voted in favor of several allegations from the EU that the US provided subsidies to Boeing Co. for civilian aircraft that weren’t in compliance with SCA (Subsidies and Countervailing Measures) Agreement rules. This resulted in, the European Communities allege, unfair export advantages for Boeing.

In the most telling passage of the ruling, the panel split the difference between faulting US subsidy and fully siding with the EU:

The Panel upheld the European Communities’ claims that: (a) some of the measures maintained by the States of Washington, Kansas, Illinois and municipalities therein, the NASA aeronautics R&D measures, some of the DOD aeronautics R&D measures, and the FSC/ETI and successor act subsidies, constituted specific subsidies.   The Panel estimated the total amount of these subsidies between 1989 and 2006 to have been at least $5.3 billion;  (b) the FSC/ETI and successor act subsidies constituted prohibited export subsidies; (c) some of the specific subsidies (i.e. the NASA and DOD aeronautics R&D subsidies, the FSC/ETI and successor act subsidies and the Washington State and municipal B&O tax subsidies) caused adverse effects to the European Communities’ interests in the form of serious prejudice, finding that the effect of these subsidies was displacement and impedance (or threat thereof) of Airbus large civil aircraft from third country markets, significant price suppression and significant lost sales.

The panel suggested that the US remove some of the subsidies, which could make a dent in Boeing’s operations in certain states. The EU, mainly on behalf its own home aircraft juggernaut, Airbus, had claimed the subsidies were worth $19.1 billion between 1989 and 2006, but the panel’s drastically reduced estimate, as detailed above, only came to at least $5.3 billion. (The WSJ article on the matter, incorrectly denotes these figures in Euro.) Boeing is undoubtedly one of the larger industrial aluminum and titanium buyers in the world; will this ruling be a major blow to their global ability to compete? Probably not. Nonetheless, it’s another significant mini-battle in the “Airliner Wars between Boeing and Airbus.

–Taras Berezowsky

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