Boeing Accused Of Receiving Illegal Subsidies

BRUSSELS (AP) — The European Union said Monday that the World Trade Organization found U.S. aid to Boeing Co. violated international rules — but both sides claimed to have won the latest round in the long-running subsidy battle between the Chicago-based plane maker and European rival Airbus.

The EU said the WTO report confirmed a preliminary ruling on the case made in September. That ruling came months after the Geneva-based trade body faulted European governments for illegally supporting local aircraft maker Airbus, a unit of European Aeronautic Defence and Space Co.

"This solid report sheds further light on the negative consequences for the EU industry of these US subsidies and provides a timely element of balance in this long-running dispute," EU trade spokesman John Clancy said in a statement.

The EU alleges that Boeing received almost $24 billion in illegal subsidies, such as research grants and free use of technology, from NASA, the Department of Defense, and the states of Illinois, Kansas and Washington. However, how much of this aid the WTO deemed illegal won't be clear until Monday's report is published some time this spring.

Boeing also claimed that the WTO had come out in its favor. "The WTO rejected almost all of Europe's claims against the United States," it said in a statement. "Nothing in today's reports even begins to compare to the $20 billion in illegal subsidies that the WTO found last June that Airbus/EADS has received."

That interpretation was echoed by the office of the U.S. Trade Representative. "The United States is confident that the WTO will confirm the U.S. view that European subsidies to Airbus dwarf any subsidies that the United States provided to Boeing," spokeswoman Nefeterius Akeli McPherson said in a statement.

The WTO body can't force countries to eliminate subsidies, but it can authorize retaliatory tariffs against products from countries that fail to comply with rulings. Considering past delays and future appeals in the Airbus and Boeing cases that stage is likely years away.

Trade analysts say the dispute will likely be resolved by negations between all parties. Their outcome could shape the future structure of the global aviation market, which is expected to be worth some $3 trillion over the next two decades and has attracted rivals from countries like China and Brazil.

Airbus and Boeing are trying to spin the WTO's rulings in their favor as they vie to secure a $35 billion contract to sell refueling jets to the U.S. Air Force.

The United States brought the dispute to the WTO in 2004, complaining that European governments supported Airbus with billions of euros in illegal subsidies. It filed the case after pulling out of a 1992 agreement limiting subsidies in the aviation industry. Brussels responded with a countersuit against U.S. support for Boeing.

The WTO ruled last year that Europe's "launch aid" to Airbus through virtually risk-free loans as well as infrastructure support, research and development funding and export subsidies from Britain, France, Germany and Spain broke international trade rules. Both the EU and the U.S. are appealing that case, in a public battle about who received more aid.

Airbus said that the WTO ruling backs its claim that illegal subsidies received by Boeing "have a significantly greater distortive effect than the reimbursable loans" made to Airbus.

Airbus estimates that it has lost at least $45 billion through lost sales and lower prices as a result of Boeing's subsidies.

"From today, Boeing can no longer pretend that it doesn't benefit from generous and illegal state subsidies. It has been doing so from the start and it's time to stop the denial," said Rainer Ohler, Airbus's head of public affairs and communications.

Airbus said it expects the dispute to carry on for "several more years," and that a negotiated settlement is the only way to resolve it.


Greg Keller in Paris and Chris Rugaber in Washington contributed to this report.