WTO Subsidy Ruling Provokes Further Feuding

 - April 15, 2011, 10:45 AM
The World Trade Organization has ruled that Boeing’s new 787 airliner has benefitted from illegal subsidies, but neither Airbus nor Boeing has accepted the verdict, prompting a further round of legal appeals. Photo credit: David McIntosh

Neither the U.S. nor the European sides are giving an inch in the prolonged legal, political and public relations battles over allegedly illegal aerospace subsidies. The World Trade Organization’s March 31 ruling on Airbus’s complaint about alleged subsidies to Boeing has already prompted an indignant European Union to appeal on the grounds that it doesn’t sufficiently damn U.S. conduct. As of press time, the U.S. government was set to launch a counter-appeal on the grounds that the findings were illegitimate.

The latest ruling found that between 1989 and 2006, Boeing received a total of $5.3 billion in various U.S. federal and state subsidies that had illegally distorted competition with Airbus and other foreign manufacturers. That amount, which relates mainly to development of the new Boeing 787 widebody, totaled just over a quarter of the $19.1 billion that the EU had accused the American side of illegally delivering to Boeing. Nonetheless, the published ruling inspired Airbus to claim a massive moral victory that vindicated the European airframer after “years of unfounded accusations and attempts to demonize Airbus.”

Not so, said Boeing, which will accept only $2.7 billion of the $5.3 billion the WTO identified. The U.S. airframer insists that illegal subsidies to Airbus top $20 billion, representing the total amount identified in the WTO’s October 2010 ruling on an earlier complaint by Boeing against its rival. The Europeans are also contesting this latest ruling as part of what seems increasingly like a vicious cycle of recriminations heading for an entirely uncertain legal outcome.

In theory, the WTO can insist on repayment of funds and imposition of fines for anti-competitive practices, but independent legal experts question whether the organization can ever make such penalties stick.