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WTO affirms ruling on illegal Boeing subsidies

FILE - In this Oct. 26, 2010 file photo, a Boeing Co. 737 airplane is lined up at the company's assembly facility in Renton, Wash. Delta Air Lines on Thursday, Aug. 25, 2011, confirmed its plan to buy 100 Boeing 737 jets as part of a fleet upgrade, with delivery set for 2013 to 2018. (AP Photo/Ted S. Warren, File)

Ted S. Warren/AP

The World Trade Organization said Boeing Co. benefited from several billion dollars in illegal subsidies, upholding most of a previous ruling as both the U.S. and the EU claimed victory in the long-running trade dispute over aid to the aircraft sector.

The decision by the WTO appellate body said that Boeing had taken advantage of up to $4.3-billion (U.S.) in illegal subsidies, from research and development funding at the Pentagon and NASA, the U.S. space agency, to special incentives offered by the city of Wichita, Kan.

Although the WTO slightly raised its estimate of the value of the subsidies, adding the Wichita program to its tally, the appellate panel cut its assessment of the "adverse effects" of these subsidies on competitor Airbus SAS to 118 lost aircraft sales.

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This mixed verdict allowed the U.S. and the EU to each claim to be the winner of the latest round in the fight over government aid to Boeing and Airbus that has been waged at the WTO since 2004.

"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," said Ron Kirk, U.S. trade representative, in a statement.

U.S. officials noted that the value of illegal subsidies, and the scale of the adverse effects, in the Boeing case were significantly lower than the estimates produced by the WTO in the case of state aid to Airbus.

European governments offered Airbus $18-billion in state aid, causing 348 lost aircraft sales for Boeing, the U.S. said, citing the WTO appellate body report in that case. "It is now clear that European subsidies to Airbus are far larger – by multiples – and far more distortive than anything that the U.S. does for Boeing," said Mr Kirk.

However, Karel De Gucht, Europe's trade commissioner, said the ruling "vindicates the EU's long-held claims that Boeing has received massive government handouts in the past and continues to do so today".

Mr. De Gucht demanded that the U.S. "put an end to such harmful subsidies."

Brussels has repeatedly urged Washington to come to the negotiating table to discuss a settlement.

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The U.S. has so far resisted, in part because Boeing has maintained that the subsidies granted to Airbus were more pernicious. From a negotiating standpoint, the U.S. has benefited from the fact that its complaint against the EU has progressed faster through the WTO system.

Unless they can reach a settlement, the next steps in the feud will involve tough decisions by both the EU and the U.S. on how to comply with the WTO and rein in their subsidies, or face the threat of retaliation and an escalation of the trade dispute.

Both Boeing and Airbus have been closely watching the outcome of the WTO proceedings, and their reactions largely tracked those of the U.S. and the EU.

"The appellate body has now spoken in both the Airbus and Boeing cases," said Rainer Ohler, Airbus' head of public affairs and communications. "Comparing the core claims made by both sides, the net outcome is clear: Boeing's cash grants are fundamentally illegal, while the system of loans to Airbus by European governments is legal and may continue."

Boeing said the appellate body had "slashed earlier findings of harm to Airbus from U.S. subsidies".

"In sum, the WTO decisions in the two cases establish conclusively and finally that European subsidies competitively disadvantage Boeing and American workers and will continue to do so until launch aid is eliminated," Boeing said.

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