Boeing Receives Illegal Subsidies, Says WTO

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The European Union (EU) said that a World Trade Organization (WTO) report found US aid to Boeing Co., a violation of international rules. Under international trade, governments are prohibited from subsidizing industry operations as it thwarts the workings of the free market making the competition in the aviation industry unfair. The report claims that Boeing won the subsidy battle against its rival the European Airbus.

The WTO report confirmed a preliminary ruling on the case that was made September of last year. Incidentally, the ruling which granted subsidy to Boeing came months after the WTO faulted EU governments for illegally supporting Airbus.

This time the EU alleges that Boeing received almost US$24 billion in illegal subsidies which include research grants and technology transfers from NASA, the Department of Defense, and the States of Illinois, Kansas and Washington.

When asked to comment about the WTO’s report, Boeing didn’t immediately respond.

One must bear in mind, however, that the WTO can’t force countries to eliminate subsidies, but it can authorize retaliatory tariffs against the products of countries that have been found guilty of illegally subsidizing market players. However, it would take quite some time before such thing happens considering the past delays history witnessed including the incessant appeals from both Airbus and Boeing when this case began.

This illegal subsidy battle began when the US brought the issue to the WTO in 2004. It complained that EU government supported Airbus, which is a unit of the European Defence and Space Co. The US charged the EU governments of shelling out billions of Euros in illegal subsidies. To back its claim, the US used the 1992 agreement that limits subsidies in the aviation industry. In response to this, Brussels filed a counter-suit against the US claiming that the US is supporting Boeing.

Last year, the WTO ruled that the EU broke international trade rules when Airbus benefited from risk-free loans, infrastructure support, research and development funding, and export subsidies from Britain, France, Germany and Spain. The US and the EU are still publicly battling it out on who received more aid.

The dispute is central to future negotiations between the U.S. and the EU on subsidies in the aviation market, which could be worth some $3 billion over the next two decades. Airbus and Boeing are also vying to secure a $35 billion contract to sell refueling jets to the U.S. Air Force.