Boeing notches victory vs Airbus on state aid
The game is far from over, European planemaker facing sanctions said
8 September, 2017
German Chancellor Angela Merkel and China's President Xi Jinping look on as Tom Enders (2R), CEO of the Airbus Group, shakes hands with a Chinese trading partner during a signing ceremony for the sale of 140 aircraft to China, Berlin, 5 July.
Boeing declared a key victory in an years-long legal case against its European rival Airbus after an international body rejected the EU's claims that Washington state was giving Boeing illegal tax incentives, news wires reported. Last Monday, the World Trade Organization's appellate body reversed a ruling by a lower WTO panel in November that said that Washington state, which is home to much of Boeing's plane manufacturing operations, had provided prohibited subsidies through a tax incentive for production of the Boeing 777X. The panel also called on the US government to take action to end the support. The US had appealed the panel's decision in December.
Over the last several years, Washington State has granted the Chicago-based Boeing some $8.7bn in tax incentives to ensure the company developed and built its 777X jetliner in Washington. But last Monday's ruling, which is final, found that none of the tax incentives provided by Washington state were illegal. The decision now goes to the WTO's dispute settlement body for formal adoption within 20 days.
“The WTO has rejected yet another of the baseless claims the EU has made as it attempts to divert attention from the $22bn of subsidies European governments have provided to Airbus and that the WTO has found to be illegal,” Boeing general counsel Michael Luttig said in a statement. "This was a sweeping and clean win for the United States,” he said.
It was one of three cases involving Boeing against Airbus. Boeing also insisted the EU faces a rising risk of sanctions “as Airbus continues to ignore rulings against its illegal practices.” Airbus, which estimates it has lost $100bn in sales because of Boeing subsidies, said: "Boeing illegal subsidies are still illegal and need to be removed. “The 'game' is far from over,” said Rainer Ohler, Airbus' executive vice president for communications.
The appellate body is expected to rule later this year on a 2016 finding that the EU failed to remedy some of the incentives to Airbus deemed illegal in 2011, and that the bloc compounded the issue with below-market loans for the planemaker’s new A350 jetliner. The US would be allowed to pursue retaliatory sanctions if the decision is upheld, Bloomberg noted. The EU has appealed and disputes US claims of $22bn in damages.
“European governments have provided billions of dollars in illegal subsidies to Airbus for years, yet they have tried and failed to create a false equivalence with the United States and Boeing,” US Trade Representative Robert Lighthizer said by email. “Today's WTO report further confirms that the EU cannot justify their own illegal subsidies by hiding behind groundless claims against the US."
BBC noted that all major planemakers receive subsidies from governments and the mother of all state aid is China. But Boeing and Airbus may be reluctant to drag China before the WTO because the estimations show that Beijing will need another 3,200 aircraft in the next 10 years, so it is their potential customer.