WTO ruling is 'knockout' blow to Boeing, claims Airbus
This week the World Trade Organisation (WTO) ruled against passenger plane manufacturer Boeing and the US state of Washington for breaking international trade rules | Photo credit: Press Association
This week the World Trade Organisation (WTO) ruled against passenger plane manufacturer Boeing and the US state of Washington for breaking international trade rules, by granting extended tax breaks to the air craft manufacturer from 2013 to 2040.
European trade Commissioner Cecilia Malmström said, “The WTO ruling is an important victory for the EU and its aircraft industry.”
Malmström added that the WTO “has found that the additional massive subsidies provided by Washington State to Boeing are strictly illegal.”
The Commissioner wanted to see the “US to respect the rules, uphold fair competition, and withdraw subsidies.”
French EPP group MEP and Vice-Chair of Parliament’s sky and space intergroup Franck Proust also welcomed the ruling, saying, “Europeans are defending a trade system based on fair competition, reciprocity and equity. The WTO ruling against Boeing is a recognition of such values.”
The EU and Airbus claimed the tax breaks Boeing received from the state of Washington was the equivalent of receiving subsidies totalling €5.37bn, which were used to for the research and production of the US plane manufacturer’s latest aircraft the, 777x.
The two biggest passenger aircraft companies in the world have been in a long-running, fierce dog fight over global sales, especially with growing markets in the Gulf, India and China.
Both companies as represented by the EU and US government, have resorted to using the WTO to launch claim and counter claim about international trading rules on government subsidies.
Airbus described the WTO ruling as a “knockout” blow to Boeing.
The European aircraft manufacturer claimed the tax breaks Boeing received had already cost them €47.14bn in lost sales.
Airbus chief executive officer Tom Enders said, “The United States and Boeing picked this fight at the WTO, and today’s ruling is yet another blow for the strategy.”
He added, “Those prohibited subsidies must be with-drawn immediately following today’s historic ruling, meaning that Boeing must give up these massive tax subsidies.”
The long running series of trade disputes between Airbus and Boeing go as far back as 2004. Both companies use government subsidies to help fund research and development of new planes.
The US manufacturer uses tax breaks from state governments, and funding from Nasa and the US department of defence to develop new planes.
Airbus receives government loans from EU member states at below market interest rates; this difference in these two funding models that have been basis for WTO cases.
However, Boeing executive Vice-President and general counsel Michael Luttig counter claimed that the WTO ruling was in fact “a complete victory for the US, Washington state and Boeing.”
According to Luttig, the EU had challenged seven different tax incentives Boeing received, of which the WTO accepted six out of the seven incentives. He also highlighted that Airbus had lost a WTO case in September, in which a ruling stated that Airbus received €20.8bn in illegal subsidies.
To end the cycle of WTO cases, Airbus said they and the EU are willing to sit down with Boeing and the US government and negotiate an agreement. But they claim Boeing will only sit down in negotiations with the precondition that EU member states stop providing loans, which immediately puts Airbus at a competitive disadvantage.
However, as Boeing and Airbus are busy slugging it out in the WTO, Chinese plane manufacturers are waiting in the wings to enter the market with their own cheaper and heavily subsidised planes.
Frank Proust warned, “The plane industry is a long term investment so Boeing and Airbus must avoid exhausting procedures without considering the rise of new competitors.”