Boeing Claims Victory in Subsidy Case; Airbus Disagrees

The long-running dispute between Boeing Co. (NYSE: BA) and Airbus related to subsidies paid by governments to the two aerospace giants inched forward on Monday when the World Trade Organization (WTO) ruled that incentives granted by the state of Washington to Boeing did not violate international trade rules.

Boeing, of course, immediately declared victory over the European Union (EU), which had brought the case (on behalf of Airbus) in 2014 after the Washington state legislature granted Boeing $8.7 billion in incentives to construct a new assembly plant in the state for the company’s new 777X commercial jet.

According to Boeing’s press announcement, the WTO’s ruling ends one of two WTO cases that the EU has brought against the United States. The ruling reverses a decision announced last November that found the state’s incentives to Boeing were subsidies that are prohibited by WTO rules.

Interestingly, Airbus does not dispute the latest ruling, choosing instead to focus on a ruling handed down in an earlier WTO trade case that Airbus claims “has confirmed that those subsidies are illegal and actionable causing massive harm to Airbus.” Airbus claims it has lost sales valued at $100 billion as a result of the subsidies to Boeing.

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In its press announcement, Airbus said:

Airbus reiterates its long-stated view that this transatlantic spat, which lead the WTO to a huge amount of serious work and a large number of important panel reports over many years, can only finally be resolved by negotiations aimed at finding a global agreement to come to a level playing field in government support for the large civil aircraft industry.

Rainer Ohler, Airbus Executive Vice President Communications, added:

Boeing illegal subsidies are still illegal and need to be removed. If it is a “No” or a “No No” does not make big difference in global fair trade & play. The “game” is far from over.

Boeing, of course, believes the game is over. The company’s general counsel, J. Michael Luttig, said:

This was a sweeping and clean win for the United States. It is now up to the European Union to comply with the WTO findings against it, and end the enduring practice of launch aid, which Airbus’ government supporters have continued to provide to each and every Airbus model.

For those keeping score at home, Monday’s ruling does indeed close the case related to the state of Washington’s incentives to Boeing to build its 777X plant in the state. But the EU and Airbus believe that the WTO’s ruling in the earlier case clearly established that Boeing had benefitted from illegal subsidies.

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