WTO’s Appellate Body Issues Latest Ruling on Boeing Subsidies

 - March 12, 2012, 2:19 PM
Airbus calls the Boeing 787 the most heavily subsidized aircraft program in history. (Photo: Boeing)

The World Trade Organization’s Appellate Body issued a ruling today that Airbus characterized as a “sweeping loss” for Boeing in the long-running dispute between the U.S. and EU over illegal government subsidies to their respective largest aerospace companies. As has become custom, both sides claimed a measure of victory in this latest ruling, addressing a complaint the European Union (EU) filed against the U.S. in retaliation for an earlier U.S. challenge against subsidies European governments provided to Airbus.

“Today’s decision is a broad repudiation of the U.S.’s arguments in this case—rejecting every single U.S. appeal regarding the subsidies given to Boeing and nearly all of its appeals as to the competitive harm that those subsidies impose, while accepting every single EU point of appeal,” said Airbus in a statement.

For its part, Boeing applauded the part of the report that “slashed earlier findings of harm to Airbus from U.S. subsidies.”

“With respect to amount, the Appellate Body found that unaddressed subsidies to Boeing total approximately $3 billion—about one-sixth of the $18 billion Europe has given to Airbus,” Boeing said in its statement. “With respect to effects, the Appellate Body rejected 66 percent of the EU’s claims that Airbus had lost sales as a result of U.S. subsidies and more than 93 percent of its claims that it had lost market share…With respect to nature, the WTO found that launch aid was a pernicious, market-distorting subsidy without which Airbus itself would most likely not have existed and no Airbus aircraft would have been built at all.  By contrast, the WTO has now found that Boeing has received little U.S. government support during the same time period since the formation of Airbus.”

Airbus, meanwhile, repeated assertions that the only element of subsidy in the repayable loans it received from EU governments amounts to only a small interest rate gap, while the U.S. provided non-repayable funding worth billions of dollars.

“The two types of support cannot be directly compared,” said Airbus. “The Appellate Body described NASA/DOD research and development subsidies as a ‘joint venture,’ where one partner, Boeing, got essentially all the benefits of the common research. This is different from the EU’s approach where EU member states acted like an investor who expects [and gets] its money paid back.”