WTO's Ruling Against US and Boeing

News The World Trade Organization released findings today the the United States has ignored a request to halt state tax breaks for Boeing in the State of Washington. This is the latest finding in a battle between the EU and US that has been on-going since 2004 over claims from both parties that Airbus and Boeing have received illegal subsidies. This finding that the US did not cease subsidies follows a similar finding that the EU did not cease its subsidies earlier. Analysis It is quite clear that both Airbus, through state-subsidized launch aid, and Boeing, through state tax breaks, have been subsidized, in violation of WTO rules. The WTO has now made multiple rulings in this case, now 15 years old, in favor or against, depending on your perspective, both sides. Airbus is claiming damages of $15 billion. Boeing previously claimed a similar amount with respect to EU launch aid. The bottom line is that both sides are cheating, and neither are likely to change with the Chinese trying to enter the market and establish a state-owned aerospace industry. Of course, today, both sides are saying they won. Airbus is celebrating the victory, while Boeing said only one state was cited, and that the finding was not as broad as the case stated. No matter what the outcome, the spin rooms never admit losses. Insight WTO rulings have, to date, amounted to virtually nothing in the aerospace sector. Despite claims and counterclaims, the only winners in these matters are lawyers and their expert economists supporting their position. In the end, the WTO has no enforcement powers, and has very little effect on the situation. -Were economic sanctions to be put into place, airlines in both the US and EU would complain bitterly, as they play off Boeing and Airbus against each other for massive discounts on new aircraft orders. Without that competition, they would pay more for those aircraft. As a result, there is countervailing pressure on the WTO from airlines not to apply tariffs or other measures that would reduce competition. The trade negotiators from the EU and US also know this, and don’t want to change the status quo. So nothing ever happens. The WTO rulings make nice headlines, but in the end, our reaction takes two words -so what?

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