WTO rules on Boeing 777X subsidies

By victoria@aviationnews-online.com November 28, 2016 10:14

WTO rules on Boeing 777X subsidies

The World Trade Organisation (WTO) has ruled today that Boeing has received illegal state tax breaks from the US Government in 2013 to produce the 777X. The US has been ordered to withdraw illegal state tax breaks for Boeing within three months. Two months ago the WTO found that the EU had failed to unwind billions of dollars in unlawful subsidies to Airbus. The EU and Airbus is appealing the ruling.

Boeing has argued in a statement that the WTO ruling today demonstrates it’s rejected of all of the EU’s challenges to six of the seven incentives and rejected most of the challenge to the seventh.  Boeing says that the WTO “held only and narrowly that a reduction in Washington state’s Business and Occupancy (B&O) tax rate for future 777X revenues is inconsistent with the WTO agreements.  The WTO threw out all of the EU’s other challenges to various incentive programs and left untouched even the B&O tax rate as it applies to revenue from the other Boeing models produced in Washington state–the 737, 747, 767, 777 (current model) and 787.”

Boeing also adds in the statement that the EU’s claim that Boeing had received $8.7 “billion in subsidies was £rejected by the WTO, which found future incentives totaling no more than $50 million a year to be impermissible.  The WTO found that to date Boeing has received no benefit from the 777X rate incentive, and will not until 2020, because the first airplane will not be delivered until then.”

“Today’s decision is a complete victory for the United States, Washington State and Boeing,” said J. Michael Luttig, Boeing’s general counsel.  “The WTO found in September that Airbus has received $22 billion in illegal subsidies from the EU and that without these subsidies neither Airbus itself nor any of its airplanes would even exist today.  By contrast, in rejecting virtually every claim made by the EU in this case, the WTO found today that Boeing has not received a penny of impermissible subsidies.”

“The WTO has repeatedly found that Airbus is entirely a creature of government, and they must now bring themselves into compliance with the international laws or risk massive sanctions,” said Luttig.

A statement from Airbus, however, paints a very different interpretation of the WTO statement, calling the report confirmation that the US has “ignored international trade rules by permitting illegal subsidies to Boeing, this time targeted at the 777X aircraft.  The Panel found Washington State’s multi-billion dollar subsidy regime for Boeing to include “prohibited” subsidies, which in the Panel’s words belong to “a special category… which Members have deemed to create such trade distortions that they are proscribed,” because they are “specifically designed to affect trade.””

“The United States and Boeing picked this fight at the WTO, and today’s ruling is yet another blow for that strategy,” said Tom Enders, Chief Executive Officer, Airbus Group.   “Those prohibited subsidies must be withdrawn immediately following today’s historic ruling, meaning that Boeing must give up these massive tax subsidies.”

“The earlier WTO rulings had already confirmed that B787 was the most highly subsidized aircraft in the history of aviation,” said Fabrice Brégier, Airbus President & CEO. “Today’s report leaves no doubt that Boeing has gone even further. The 777X will not cost Boeing a single dollar to develop thanks to Washington State’s taxpayers. We estimate the damage to Airbus and the European aerospace industry in the region to be $50 billion so far, and that’s only for the 777X. The United States Trade Representative (USTR) should take immediate action. This cannot go on any longer. It is time for the U.S. Trade Representative to insist that Boeing cease its anti-competitive behavior.”

This is certainly not the end of the long-running debate, which is likely to be shadowed by years of appeals. Airbus and Boeing contend the other has received several billion dollars in financial backing that contravenes international trade rule but despite two rulings in the past three months, their statements show that they are no closer to resolving this argument once and for all.

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By victoria@aviationnews-online.com November 28, 2016 10:14