The EU, and aircraft manufacturer Airbus, scored a significant victory on Monday (28 November) after the World Trade Organisation (WTO) ruled that the US government’s financial assistance to Boeing is illegal.
The WTO said that the US subsidies, supporting the production of Boeing’s 777X passenger jet, are “prohibited” as they encouraged the use of domestic materials, fuelling unfair trade.
The panel called for the subsidies to be withdrawn within three months.
“The 777X will not cost Boeing a single dollar to develop thanks to Washington State’s taxpayers,” said Airbus President & CEO Fabrice Brégier.
According to Airbus estimates, the economic impact for the European aerospace industry amounts to $50 billion so far.
“We expect the US to respect the rules, uphold fair competition, and withdraw these subsidies without any delay,” said Trade Commissioner Cecilia Malmström. She described the ruling as an “important victory” for Europe.
But Boeing stuck to its guns and expected to preserve “every aspect” of the public incentives, including the 777X tax breaks. The Seattle-based aviation giant expects the US government to appeal the decision.
The company also noted that the WTO panel rejected six out of seven complaints made by the Europeans concerning the subsidies granted to Boeing by the US.
This is the last episode in the twelve-year dispute between Airbus and Boeing over subsidies provided to them by both EU member states and the US.
But this is the first time in the history of the litigation that the WTO has found that one of the parties, in this case the US, has granted illegal subsidies which discriminate against foreign producers.
The Commission pointed out that tax breaks given to Boeing, until 2040, depend on the use of wings manufactured in the US, which discriminates against foreign suppliers.
According to the executive, the support scheme set up by the Americans, in this instance, is amounts to an estimated $5.7 billion.
In the spring of 2017, the WTO is expected to issue a report on another long-standing case, which will confirm the extent of the US WTO-incompatible subsidies to Boeing, AFP reports.
In September, a WTO panel found that Brussels had not respected a 2011 ruling ordering it to take steps to withdraw several support and subsidy programmes for Airbus.
The WTO did not put a value on those programmes but Boeing said they amounted to $22 billion worth of illegal support for Airbus development and sales, mostly in subsidised loans.
The EU has appealed that decision, insisting that the subsidies in question had in fact been interrupted.
Meanwhile, a separate 2012 WTO ruling on benefits Boeing received from federal, state and local governments in the US remains a source of dispute, with a report on the issue due out in the coming months.