‘Sweeping win for U.S.’ in tax row with EU over Boeing subsidies

Plane maker given $8.7B in tax incentives

CHICAGO/LONDON • Boeing Co. won a round in a long-running U.S. trade dispute with the European Union over government backing for the plane maker and competitor Airbus SE.

The World Trade Organization’s appellate body overruled a lower-level finding that US$8.7 billion in tax incentives awarded by Washington state to Chicago-based Boeing for the development of the 777X jetliner constituted the most serious transgression of subsidy restrictions. The appellate body isn’t making a recommendation in the dispute, it said Monday in a statement.

“This was a sweeping and clean win for the United States,” Boeing general counsel J. Michael Luttig said in a separate statement. “The latest of the false claims Airbus and its government sponsors have made has now been rejected by the WTO.”

The U.S. and the EU have spent more than a decade tangling over government efforts to help Boeing and Toulouse, France-based Airbus defray billions of dollars in costs to create commercial aircraft. The WTO ruling on Monday effectively ends the dispute over aid provided to Boeing by the state to ensure the plane maker would manufacture the 777X and its carbon-fibre wing in Washington, although two other cases are still pending.

The three-judge appellate panel overturned an earlier WTO finding that a 40 per cent reduction in a Washington state levy on 777X gross receipts was a prohibited subsidy. While the tax relief spurred Boeing to build the new jetliner at its factory in Everett, Washington, the aid didn’t prompt the plane maker to favour domestic parts over imports, the panel said.

The appellate body also rejected Europe’s contention that six other elements of the state’s incentive package were illegal. No further appeal is available to the EU on this case. The ruling doesn’t preclude the 777X subsidies from being used in a separate and broader case brought by Airbus against Boeing in response to the U.S. manufacturer’s initial application against its rival in 2004. That case is still in its compliance phase and has separately determined the subsidies to be “actionable,” a lesser but still illegal transgression of WTO rules, Airbus said in a statement.

“Boeing illegal subsidies are still illegal and need to be removed,” Airbus spokesman Rainer Ohler said by email. “The ‘game’ is far from over.”

The appellate body is expected to rule later this year on a 2016 finding that the EU failed to remedy some of the incentives to Airbus deemed illegal in 2011 and that the bloc compounded the issue with below-market loans for the planemaker’s new A350 jetliner. The U.S. would be allowed to pursue retaliatory sanctions if the decision is upheld. The EU has appealed and disputes U.S. claims of US$22 billion in damages.

“European governments have provided billions of dollars in illegal subsidies to Airbus for years, yet they have tried and failed to create a false equivalence with the United States and Boeing.” U.S. Trade Representative Robert Lighthizer said by email. “Today’s WTO report further confirms that the EU cannot justify their own illegal subsidies by hiding behind groundless claims against the U.S.”

BOEING The World Trade Organization has sided with the United States in a long-running dispute over tax incentives given to Boeing in its development of the 777X jetliner. Its main competitor, Airbus, has argued the subsidies are “illegal.”