Gotcha! US Faulted by WTO on Susidizing Boeing

♠ Posted by Emmanuel in ,, at 3/31/2011 05:18:00 PM
Today, the WTO finally released its panel report on the EU's complaint against the United States regarding American subsidies for Boeing (case # DS353). This, of course, is the countersuit launched by the EU in the wake of the US launching a case against Airbus on launch subsidies (DS316). I have always thought both parties, EU-Airbus and US-Boeing, culpable of subsidizing aircraft development and that it would ultimately prove to be a wash. And so it has come to pass: it seems Boeing too is not scot-free alike its European consortium counterpart.

The key part of the panel report faulting the US on aid to Boeing is here:
The Panel upheld the European Communities' claims that: (a) some of the measures maintained by the States of Washington, Kansas, Illinois and municipalities therein, the NASA aeronautics R&D measures, some of the DOD aeronautics R&D measures, and the FSC/ETI and successor act subsidies, constituted specific subsidies. The Panel estimated the total amount of these subsidies between 1989 and 2006 to have been at least $5.3 billion; (b) the FSC/ETI and successor act subsidies constituted prohibited export subsidies; (c) some of the specific subsidies (i.e. the NASA and DOD aeronautics R&D subsidies, the FSC/ETI and successor act subsidies and the Washington State and municipal B&O tax subsidies) caused adverse effects to the European Communities' interests in the form of serious prejudice, finding that the effect of these subsidies was displacement and impedance (or threat thereof) of Airbus large civil aircraft from third country markets, significant price suppression and significant lost sales.
For the sake of clarity, FSC/ETI refers to "[t]ax break exemptions under legislation relating to Foreign Sales Corporations (“FSC”) and the Extraterritorial Income Exclusion Act (“ETI”) and successor acts. Both function as effective subsidies when marketing Boeing civil aircraft abroad.

Transatlantic bickering has already begun, with EU Trade Commissioner Karel de Gucht (obviously) claiming a victory:
"This WTO Panel report clearly shows that Boeing has received huge subsidies in the past and continues to receive significant subsidies today. The US began this dispute in 2004 and now finds itself with a crystal clear ruling that exposes its long-running multi-billion dollar subsidisation of Boeing through Federal and State programmes as illegal.", said EU Trade Commissioner Karel De Gucht. "These subsidies have resulted in substantial harm to EU interests, causing Airbus to lose sales, depress its aircraft prices and unfairly lose market share to Boeing. The detrimental costs to EU industry from this lengthy and onerous subsidisation run into billions of euro. We therefore welcome the WTO Panel's report and call on the US Government to take the appropriate steps that may assist to achieve a mutually agreed solution to this dispute.", Commissioner De Gucht added.
Meanwhile, the Yankees point out that this ruling pales in comparison to launch aid violations previously found against the EU. (And of course the USTR was similarly chuffed when the findings came out against the EU last year.)
Compared with the ruling over Airbus aid, today’s panel report “reveals a market distorted by Airbus’ practices, with illegal launch aid being the key discriminator,” J. Michael Luttig, Boeing executive vice president and general counsel, said in a statement. Boeing wants its bigger rival to reimburse the illegal portion of so-called launch aid until repayments reach what they would have been had the loans been made at market rates.
Both sides can appeal their respective rulings, with the Europeans already having done so. Still, you have to wonder about how much time and effort is being put into something that will likely be deemed a wash at the end of a long process of litigation.

Who benefits in the end? As in many such proceedings, the (trade) lawyers, of course.