WTO rules US aid to Boeing is illegal

AP News
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Posted: Mar 31, 2011 3:01 PM
WTO rules US aid to Boeing is illegal

The World Trade Organization has ruled that Boeing Co. received at least $5.3 billion in illegal U.S. subsidies to develop and build new planes, according to a finding of a report first issued in January but made public on Thursday.

The WTO trade panel's report came in response to EU complaints, which had alleged that Boeing received almost $24 billion in illegal state subsidies between 1989 and 2006.

The public release of the ruling Thursday is the latest development in a six-year contest and will likely next go to a WTO appeals panel.

WTO say in its ruling that the EU has demonstrated the U.S. gave Boeing "export subsidies that are prohibited" and recommends the U.S. either withdraw them or "take steps to remove the adverse affects."

The report details findings, which were first issued in private to the EU and U.S. in January. It says Beoieng received illegal subsidies such as grants and free use of technology, from NASA, the Department of Defense, and the states of Illinois, Kansas and Washington.

These include $2.6 billion in NASA research and development programs, $2.2 billion in foreign sales corporation export subsidies, and various tax breaks and other incentives from several states and cities. The Defense Department also gave Boeing an illegal subsidy, the ruling says, but "the amount of the subsidy ... is unclear."

Other subsidies, such as the $2.2 billion in export tax benefits, are essentially a moot point, the panel found, because U.S. law has changed.

The ruling says the panel estimated the subsidies were "at least $5.3 billion over the period 1989-2006."

The panel of trade judges say that $2.6 billion in NASA aid, $112 million from the Defense Department and $16 million in tax breaks from Washington state and the city of Everett, Wash., violated international trade rules.

Competing aircraft maker Airbus, a unit of European Aeronautic Defence and Space Co., estimates it has lost $45 billion in aircraft sales because of the subsidies.

The release of the ruling Thursday is the latest development in a six-year contest and will likely next go to a WTO appeals panel.

A separate WTO trade panel, ruling on U.S. complaints, also has faulted European governments for illegally supporting Airbus.

Airbus welcomed the ruling saying that WTO had "publicly condemned the United States for giving Boeing massive illegal subsidies that caused Airbus to lose $45 billion in sales."

Boeing, meanwhile, said the WTO had "shattered the longstanding European myth that illegal Airbus subsidies are necessary to fend off alleged U.S. subsidies to Boeing."

Boeing acknowledged it got $2.6 billion of illegal U.S. funding, but said that pales in comparison to $20 billion of "illegal Airbus subsidies."

That interpretation was echoed by the office of the U.S. Trade Representative, which said the subsidies the Europeans give to Airbus "dwarf anything that the U.S. government does for Boeing."

Germany was quick to welcome the WTO's ruling.

"The WTO confirms that the U.S. subsidies were considerably damaging for the European aviation industry, to Airbus in particular," Economy Minister Rainer Bruederle said in a statement Thursday.

Germany said it supports the EU effort to allow both the Boeing and Airbus cases to be judged by the WTO at the same time. As the two giant aircraft manufacturers have dueled, other nations' industries have begun muscling into the business.

"Despite the findings in the WTO's Boeing report, we have to continue working toward a political solution without preconditions," Bruederle said. "From an economic policy point of view, this is necessary for the future of the aviation industries on both sides of the Atlantic, especially in light of the changed global competition."

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Juergen Baetz in Berlin contributed to this report.