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

The World Trade Organization has ruled that U.S. aircraft manufacturer Boeing received $3 billion to $4 billion in illegal subsidies in the form of federal research grants and local tax breaks, the top U.S. trade official said Monday.

But U.S. Trade Representative Ron Kirk called the decision "a tremendous victory" for the United States because he said a separate WTO panel ruled last year that European governments provided $18 billion in subsidized funding for 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," Kirk said in a statement.

"The United States is ready to address all of the WTO findings, and we expect Europe to do the same. Airbus is a mature, highly capable company with ready access to commercial financing. It doesn't need the launch aid that European governments are continuing to provide," he added.

The WTO appellate body ruling on Monday faulted the United States for research funded by NASA and the Department of Defense that benefited Boeing and for tax breaks granted by the state of Washington and city of Wichita, Kansas.

The United States will have six months to comply with the ruling, once it is formally adopted this month, Kirk said.  

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

Washington seeks to extend hegemony to trade

(Global Times)

US President Barack Obama signed an order Tuesday to create an interdepartmental task force to enforce trade agreements. Some commented that it is directly targeting "unfair trade practices" by its major trade partner China. On the same day, the Information Technology & Innovation Foundation, a Washington think tank, issued a report entitled Enough is Enough: Confronting Chinese Innovation Mercantilism. 

It accused Beijing of using various tricks like subsidies or export restrictions to gain an "absolute advantage" for its companies and urged Washington to "build a global free-trade coalition" with allies to push back against China.

The US has not made such endeavors before. China is facing serious trade frictions. The US deemed that their manufacturing industry is most effective, and "unfair trade practices" are an easy target.

US politicians have repeatedly instilled voters with such information: China is challenging the global trade rule with "national capitalism," and the US must strike back.

Actually, the US is challenging and damaging the rule. Perhaps Washington feels the WTO has become less and less helpful and it has to create a new alternative. The US government now integrates resources and attempts to deal a severe blow to "unfair trade practices" at any time.

However, no matter how strong the US is, it cannot expand and impose its will to a world which will not accept a trade power overriding the WTO. If anyone can freely create an enforcement unit to pursue personal interests, where can world trade order be found?

The world's largest importer cannot seek limitless power, especially since China is only years away from becoming the top importer itself.

This year will see presidential elections in the US and politicians are scoring cheap points on the back of foreign countries. The Democratic Party and Republican Party can always find unity against China.

China has to be clear. China's annual exports to the US were $320 billion last year, but US sanctions against Chinese exports were at no more than $10 billion. The US will not risk a major showdown.

Due to strategic mistrust, mutual precautions are increasing and the risks of politicalizing future trade frictions are intensifying.

US politicians like to exaggerate matters. China should ignore this, stick to WTO rules in the trade lawsuit against the US and protect the interests of Chinese companies.

We should not be intimidated by this so-called enforcement office. The US is not in a position to assess China's trade system. Only the WTO is qualified to assess and WTO Director-general Pascal Lamy has given an A+ to China's performance since its accession.

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