WTO’s Latest Ruling a Mixed Bag for Boeing, Airbus

 - June 9, 2017, 12:27 PM

The World Trade Organization on Friday concluded that the U.S. has not complied with several articles of a previous settlement and countervailing measurements (SCM) agreement to curb government subsidy of Boeing commercial airplane sales. However, the European Union didn’t establish that several other measures involve subsidies, including certain procurement contracts between the DOD and Boeing, said the WTO.

As has become customary, both Boeing and Airbus have declared victory in the latest chapter of the long-running saga, and the ultimate effect of the latest ruling remains ambiguous.

Perhaps most notably, the WTO’s Dispute Settlement Body (DSB) ruled that the U.S. failed to withdraw certain pre-2007 NASA and U.S. Department of Defense subsidies and that the EU did establish that tax breaks from the state of Washington have damaged several Airbus single-aisle campaigns, for example.

Boeing, however, claimed nearly total victory, insisting that the WTO found that the U.S. complied with virtually all of its decision in the countercase the EU filed in 2006.

The WTO again categorically rejected Europe’s and Airbus’s claims,” said Boeing general counsel Michael Luttig. “The WTO originally dismissed 80 percent of the allegations the EU first made, and today stated unequivocally that the United States has complied with virtually all of the WTO’s findings on the remaining amount.”

Today's ruling on U.S. compliance stands in sharp contrast to the WTO’s finding last September that the EU had done virtually nothing to comply with the WTO’s decision against the illegal, market-distorting launch aid subsidies provided to Airbus for 40 years,” Luttig added. “On top of that, the WTO also found that the EU has continued to make even more illegal subsidies to Airbus by providing launch aid to yet another product, the A350.”

For its part, Airbus claims the measures established as illegal subsidies by the WTO have amounted to more than $100 billion in lost sales for the European airframer.

The amount of money involved completely distorts trade,” said Airbus CEO Tom Enders. “I salute the EU for what again is a great victory for fair trade in commercial aviation. The clarity provided by the WTO in continuous rulings over a decade is impressive and far reaching: First, the WTO stated that the U.S. subsidy system provides largely for illegal grants while the European reimbursable launch investment system based on loans is principally compliant with international trade law. Today, the WTO panel has demonstrated how Boeing continues to seek the benefits from this extensive illegal support, at the great expense of a level playing field in the worldwide aviation industry.”