Thursday, 15 March 2012

WTO rules U.S. unfair subsidies for Boeing illegal

The U.S. is hailing a World Trade Organization ruling on illegal Boeing subsidies as a victory. (Roslan Rahman/AFP Reuters

Appellate body rules unfair US subsidies have damaged rival Airbus

GENEVA: The World Trade Organisation has ordered the United States to halt unfair subsidies and tax breaks to planemaker Boeing, judging them to have damaged European rival Airbus.

The WTO's appellate body said that it found that certain subsidies and tax breaks “caused, through their effects on Boeing's prices, serious prejudice in the form of significant lost sales” to Airbus in the market for civil aircraft with 100 to 200 seats, according to a summary of the 700-page ruling.

That segment is for the medium-haul Airbus A320 and Boeing 737, which are their top selling aircraft.

It also found that research and development subsidies skewed competition for larger aircraft of 200 to 300 seats, and that such subsidies for the 787 Dreamliner “caused serious prejudice to the interest of the European Communities.” The United States has six months to comply with the ruling.

An Airbus A380 behind a Boeing 787 plane’s vertical tail. The WTO confirms that Boeing has received illegal subsidies, a decision that is seen as a victory by both the US aircraft maker and Airbus
Even before the publication of the WTO ruling, both the European Union (EU) and United States claimed victory in the dispute.

The EU had launched the complaint, claiming the United States gave Boeing billions of dollars in illegal subsidies after Washington had disputed EU aid to European aircraft manufacturer Airbus.

In a ruling on March 31, 2011, the WTO partly upheld the EU complaint, but it was appealed.

The European Commission welcomed the WTO final ruling, saying it confirmed that billions of dollars in US subsidies to Boeing were illegal under WTO rules.

“The ruling vindicates the EU's long-held claims that Boeing has received massive US government hand-outs in the past and continues to do so,” said EU Trade Commissioner Karel De Gucht.

The United States took the opposite stand, saying the WTO decision confirmed that Europe's unfair trade subsidies to Airbus have dwarfed US aid to Boeing.

“This decision is a tremendous victory for American manufacturers and workers - and demonstrates the Obama administration's commitment to ensuring a level playing field for Americans,” Ron Kirk, the US Trade Representative, said in a statement before the WTO appeals panel published its findings.

“It is now clear that European subsidies to Airbus are far larger - by multiples - and far more distortive than anything that the United States does for Boeing,” he said.

The United States highlighted that the WTO had found last May in a separate case that the EU gave Airbus US$18bil (13.7 billion euros) in subsidised funding that resulted in lost market share and sales for Boeing.

“In yesterday's findings, the comparable figures (for Boeing) were between US$3bil and US$4bil in subsidies, and lost sales (for Airbus) of just slightly more than 100 aircraft,” the statement said.

The European Commission said the WTO appeal ruling found that Boeing received between US$5bil and US$6bil of illegal subsidies between 1989 and 2006, and was estimated to have received US$3.1bil more since.

Airbus said the WTO ruling found the effects of the illegal funding were much larger.

“The report confirms the existence of illegal US subsidies to Boeing previously identified by the WTO as at least US$5.3bil' and extended by billions of US dollars as a result of yesterday's decision - resulting in an estimated loss of approximately US$45bil in sales for Airbus,” the company said in a statement. AFP

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