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WTO ruling in favour of Boeing reflects pre-crisis time

WTO ruling in favour of Boeing reflects pre-crisis time
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First Published: Sat, Sep 05 2009. 11 25 AM IST
Updated: Sat, Sep 05 2009. 11 25 AM IST
Washington: The World Trade Organization’s ruling that European loans for Airbus were illegal subsidies is being cheered by US lawmakers loyal to the Boeing Co, even though the preliminary decision may seem quaint in a world where government subsidies, bailouts and takeovers are now commonplace.
Friday’s ruling reflects the world as it existed five years ago when the United States brought the case against the European Union, arguing that such subsidies were unfair trading practices.
But since then, the deep global recession has led to hundreds of billions of dollars in government subsidies and intervention in nearly all the world’s major economies, including big government ownership stakes in banks, and auto and insurance companies.
Furthermore, other countries, including China, Japan and Brazil, are busy expanding or developing their domestic airline industries.
At issue is a 1,000-page confidential ruling that was given to US and European trade officials. It was not released yet, and officials were under instructions not to speak publicly.
Still, lawmakers from Washington state and other US states where Chicago-headquartered Boeing has a major presence were briefed by the Office of the US Trade Representative on Friday.
Sen. Patty Murray, a Democrat from Washington state who led efforts in 2004 to get the Bush administration to initiate the WTO case, said the ruling “confirms that Boeing has been competing on an uneven playing field for decades.”
Friday’s decision confirms that “all Airbus aircraft have received illegal subsidies and that these have caused material harm to Boeing,” said Rep. Norm Dicks, a Washington Democrat.
Neither Boeing nor Airbus would comment on the ruling publicly, nor would US or EU trade officials.
However, European officials who were briefed had a somewhat different take on the ruling than American lawmakers, suggesting that it was more of a mixed bag and that many of the complaints lodged by the US had been dismissed and the government loans to Airbus were in some instances deemed a permissible form of financing.
The WTO finding was the first step in a process that could take years to produce a final result.
The organisation doesn’t have the power to impose sanctions itself, but it can allow a nation that has been harmed—in this case the US—to raise tariffs or impose other barriers to imports from an offending country or countries.
And that wouldn’t be limited to aircraft. It could also include, for instance, purses, sweaters or French wines. The amount of such tariffs could be high enough to offset the damages done by the illegal practices.
“The United States has always maintained that the European governments have provided unfair subsidies to Airbus that harm US interests,” said Deborah Mesloh, deputy assistant US trade representative in Washington, ahead of Friday’s ruling.
Friday’s ruling was Part One of the process. A ruling on an EU counter-complaint against the US claiming that the Pentagon and Nasa are indirectly subsidising Boeing is being heard by a separate WTO panel and a ruling is expected in about six months.
“We have a good case against them, and they have a serviceable case against us,” said Jeffrey Schott, a trade expert with the Peterson Institute for International Economics.
Both disputes in the Boeing-Airbus rivalry are over what is projected to be a $3.2 trillion global aviation market over the next 20 years.
Sen. Maria Cantwell, a Democrat from Washington state, said the case “sets an important precedent that must be respected by all countries with an emerging commercial aircraft industry.” She also said it should discourage European governments from going ahead with an additional $4.6 billion in proposed subsidies for Airbus to develop its new extra wide-bodied A350 airliner, which will compete with Boeing’s long-delayed 787 Dreamliner.
Financing for the A350 airliner was not part of the US case before the WTO.
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First Published: Sat, Sep 05 2009. 11 25 AM IST
More Topics: WTO | Boeing | Airbus | Airlines | Subsidies |