Boeing downplays illegal subsidies

In the latest Boeing-Airbus showdown, the world’s two biggest plane manufacturers each claimed vindication from a World Trade Organization ruling Monday that the U.S. had provided billions in illegal subsidies to Boeing.

The U.S. government and the Chicago-based company noted, however, that the WTO did not buy the most extravagant European claims about the U.S. subsidies and already had come down much heavier on the European Union for its support of Airbus.

“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,” U.S. Trade Representative Ron Kirk said in a statement reacting to the ruling by the WTO’s Appellate Body. “The United States is ready to address all of the WTO findings, and we expect Europe to do the same.”

European leaders and Airbus are cheering the WTO’s decision that Boeing had received “at least $5.3 billion” in illegal subsidies from the U.S. from 1989 to 2006.

While the U.S. says the number is closer to $3 billion to $4 billion, the Europeans’ initial case had claimed $19 billion in illegal U.S. subsidies, though they recently had scaled that claim back.

The federal funding includes $2.6 billion from NASA, $1.2 billion from the Department of Defense, and $2.2 billion from the Foreign Sales Corporation, according to the EU. Kansas also provided about $500 million in illegal subsidies, while Washington state gave or promised $3.1 billion in illegal funding from 2006 through 2024, the Europeans claimed.

Airbus claims these subsidies resulted in the company losing about $45 billion in sales to Boeing.

“Today’s ruling vindicates the EU’s long-held claims that Boeing has received massive U.S. government hand-outs in the past and continues to do so today,” EU Trade Commissioner Karel De Gucht said in a statement.

“The costs to EU industry from these long-term subsidies run into billions of euro. This landmark ruling clearly shows the U.S. has used an unlawful way of supporting business that has stood in the way of fair competition. The U.S. should now put an end to such harmful subsidies.”

But the U.S. government and the Chicago-based manufacturer were satisfied with the results.

“The Appellate Body today slashed earlier findings of harm to Airbus from U.S. subsidies,” Boeing said in a statement. “The decision confirms that in terms of amount, effect and nature, U.S. government support to Boeing is minimal in comparison to the massive European subsidies provided to Airbus.”

The U.S. points out that Europe’s support for Airbus was at least three times higher than Boeing’s respective support. In May 2011, the WTO panel issued a similar decision against the EU for $18 billion given to Airbus in low-interest loans known as “launch aid.”

According to the U.S. trade representative, this European program has cost Boeing far more business than American subsidies did Airbus - 342 lost sales of large civil aircraft. That compares to slightly more than 100 sales Airbus has lost because of Boeing’s subsidies.

Both sides accused the other of relying heavily on the subsidies.

Airbus said Boeing would not have been able to launch its popular 787 Dreamliner without the help of the U.S. government, leading the European company to nickname the rival plane the “Subsidy-liner” and the “7-aid-7.”

Boeing called the launch aid program a “market-distorting subsidy without which Airbus itself would most likely not have existed and no Airbus aircraft would have been built at all.”

While Boeing says it is ready to comply with the ruling, it also said Europe has yet to comply with the WTO’s similar finding against its support of Airbus.

“Airbus has not shown the same commitment to compliance with the WTO’s decisions and rules,” Boeing said. “The EU had until Dec. 1, 2011, to comply with the ruling against the illegal Airbus subsidies, and it refused to comply.

“What’s more, European governments have recently provided billions of dollars in new launch aid for the next Airbus model, the A350, continuing this illegal practice in defiance of the WTO.”