By John T. Bennett - 01/31/11 07:56 PM EST
The World Trade Organization (WTO) has found that Chicago-based Boeing received billions in illegal assistance from several U.S. government entities, including the Pentagon and NASA.
In a statement, Airbus said the coming formal WTO ruling will state that Boeing has received “at least $5 billion” in illegal aid from U.S. government coffers. Airbus also alleges the report will highlight “an additional more than $2 billion in state and local subsidies that Boeing will receive in the future, [which] are illegal.”
Those differing figures were among a list of barbs the rivals traded after word of the ruling leaked.
Boeing says a previous WTO ruling found subsidies to Airbus were more egregious, adding that Monday’s decision “will not require any change in policy or practice.” Airbus countered with a charge that Boeing could not have developed its 787 aircraft without illegal government payments that have had a “significant and ongoing negative” impact on the European firm.
“Today’s reports confirm the interim news from last September that the WTO rejected almost all of Europe’s claims against the United States, including the vast majority of its R&D claims — except for some $2.6 billion,” Boeing said. “This represents a sweeping rejection of the [European Union’s] claims.”
Boeing spokesman Tim Neale said the difference between Airbus’s $5 billion figure and its $2.6 billion total stems from a Nixon-era tax provision, called the Foreign Sales Corporation (FSC). That loophole gave U.S. exporters a break on goods shipped abroad. The WTO already sided with European complaints against FSC, and Congress ended the program.
Boeing’s numbers strip out all FSC aid "since it is no more," Neale said in a telephone interview.
Whatever the final dollar amount, Airbus alleges, “the effect of the subsidies is significantly larger than the face value of the subsidies in light of their particularly pervasive nature.” The subsidies to Boeing “thoroughly distorted competition” in the global aviation sector and did “significant harm” to European aviation companies, Airbus said in its statement.
Further, the European firm states the WTO will brand Pentagon and NASA funding as “illegal subsidies,” which will “require fundamental changes to the U.S. funding mechanisms.”
The ruling will find fault primarily with how some NASA research and development was structured, Neale said. “If an appeal fails, then, yes, NASA would likely have to restructure those R&D programs,” he said.
But that likely would not preclude Boeing from seeking such development contracts from the space agency, Neale said.
The key is that the government not provide funds to Boeing to transfer lessons from such programs to its commercial products, which appears to have happened in the past.
It quickly became clear that Boeing’s strategy is to downplay Monday’s reports and focus instead on last June’s WTO ruling that Airbus got $20 billion in illegal subsidies from European governments.
For its part, Airbus calculates it lost $45 billion in sales due to the illegal government help Boeing received.
Meantime, Neale said Airbus’s charge that his firm could not have started its 787 airliner program without the subsidies was false.
“The 787 would have most definitely launched without subsidies,” he said. “We developed that aircraft with our own money. It would have gone ahead regardless of what NASA was doing.”