WTO Subsidy Ruling Sets Stage for U.S. Appeal

The World Trade Organization (WTO) has issued, but not released publicly, the final ruling on the European Union’s claim that Boeing has benefited from illegal state aid for its commercial aircraft, upholding at least some of what Brussels had charged.

The ruling, which remains closely held and will not be made public for several weeks, closely follows the preliminary finding issued in September.

The verdict, emanating today from Geneva, is the latest in a series of milestones in the long-running subsidy dispute between the U.S. and European Union, a dispute that kicked off when Washington challenged aid provided by European states to Airbus.

The WTO now effectively has ruled that both Airbus and Boeing have benefited from subsidies that are not compliant with existing international trade rules. The U.S. case against Europe already is in the appeals stage. Industry officials indicate they expect the U.S. to now also appeal this finding.

Both sides have charged that the other will have to take steps to remedy billions of dollars worth of subsidies, although the WTO so far has not issued any figure on the actual harm done.

But U.S. officials stress that around April, the WTO will issue its verdict on the European appeal. If the European’s lose, then that side would have 90 days to come into compliance with the WTO ruling. If Europe does not do so, the U.S. can seek penalties, although establishing their size would require a renewed appeal to the WTO.

Airbus, in a statement issued after the Jan. 31 final report was issued, says that it expects the public version to state that Boeing “would not have been able to launch the 787 without illegal subsidies” and that funding from both the Pentagon and NASA contravene subsidy rules. Airbus also repeated its call for a negotiated resolution to the dispute.

Boeing, in a statement, says that the reports of the ruling “confirm the interim news from last September that the WTO rejected almost all of Europe’s claims against the United States, including the vast majority of its R&D claims - except for some $2.6 billion. This represents a sweeping rejection of the EU’s claims.”

The company also notes the WTO has found more violations against Europe than the U.S., a claim exactly opposite what Airbus officials argue.

European officials also have argued the subsidy case is increasingly without logic at a time when emergent rivals, such as China, are using massive state support to build rivals to the existing large commercial aircraft makers.