Boeing's improper subsidies smaller than Airbus', WTO finds

Confirming preliminary reports from September, a confidential World Trade Organization (WTO) ruling released to the affected parties Monday found Boeing guilty of receiving illegal subsidies.

But the total amount cited was a fraction of the amount reported in a parallel WTO ruling against Airbus last June.

"The United States is confident that the WTO will confirm the U.S. view that European subsidies to Airbus dwarf any subsidies that the United States provided to Boeing," said U.S. Trade Representative spokeswoman Nefeterius McPherson.

The report was released only to the U.S. government and the European Union (EU). It won't be available to the public or news media for two to three months, until it is translated into French and Spanish.

In a statement, Airbus said the report shows Boeing received "at least $5 billion" in illegal subsidies. It said the ruling, when made public, will show that without those illegal subsidies "Boeing would not have been able to launch the 787."

If confirmed, that allegation about the funding of Boeing's crucial new jet is certainly serious.

But in comparison, the final public WTO report issued last year on the subsidies to Airbus was a broader indictment. That ruling found illegal the $15 billion paid in advance specifically to fund the development phase of all Airbus' jet programs, plus $5 billion in other subsidies.

Furthermore, sources on the U.S. side of the case said in September that about 40 percent of the $5 billion figure for Boeing subsidies pertained to a U.S. tax law that has already been changed. Boeing considers this portion of the WTO finding already remedied.

If that is confirmed when the final report is publicly released, it would leave just $3 billion in illegal subsidies Boeing must answer for, versus $20 billion for Airbus parent company EADS.

In a statement, Boeing called the conclusions of the WTO report "a sweeping rejection of the EU's claims." The EU had alleged Boeing received some $24 billion in illegal subsidies.

"Today's reports confirm the interim news from last September that the WTO rejected almost all of Europe's claims against the United States," Boeing's statement said. "Nothing in today's reports even begins to compare to the $20 billion in illegal subsidies that the WTO found last June that Airbus/EADS has received."

Airbus took an opposite view. In a statement, Airbus declared the WTO ruling an "excellent result."

Besides the $5 billion in illegal subsidies already received by Boeing, Airbus said the WTO report points to "more than $2 billion in state and local subsidies that Boeing will receive in the future" that are also illegal.

This is a reference to tax breaks and other incentives to Boeing from the states of Washington and Kansas, which will benefit Boeing through 2024.

It's unclear how the WTO process will affect those future subsidies, or what remedies for the other findings each airplane manufacturer will have to offer.

Boeing claims that a key part of the ruling against Airbus means the European jet maker's parent, EADS, "must repay or restructure $4 billion in still outstanding illegal launch-aid subsidies Airbus received to develop the A380" double-decker jet.

In contrast, Boeing claimed that "today's decision will not require any change in policy or practice" on its part.

But Airbus strenuously denies it will have to pay back any past subsidies and is moving forward to secure new government launch aid for its next jet, the A350.

Airbus welcomed the finding against Boeing and pointed to the likelihood of years of legal and bureaucratic wrangling before any outcome affects how it operates.

"The myth that Boeing doesn't receive government aid is over," said Rainer Ohler, Airbus' head of public affairs. "We expect the WTO dispute to carry on for several more years and as in all trade conflicts, a resolution will only be reached through negotiations."

Washington state politicians immediately used the apparent imbalance in the twin WTO rulings as an argument in their campaign against the possibility Airbus could beat Boeing in the Air Force tanker competition.

"The EU is trying to make a mountain out of today's molehill of a ruling," said U.S. Rep. Rick Larsen, D-Lake Stevens. "As the Defense Department moves forward with the tanker competition, it cannot ignore the fact that Airbus has fueled its bid with billions of dollars in illegal subsidies from the European government."

Dominic Gates: 206-464-2963 or dgates@seattletimes.com