Boeing Faces WTO Sanctions
November 27 2016 - 2:21PM
Dow Jones News
By Robert Wall and Doug Cameron
The World Trade Organization as early as Monday is expected to
rule that Boeing Co. has been granted illegal state subsidies for
its newest long-range jetliner, according to people familiar with
the finding.
The judgment involves tax incentives Boeing will receive from
Washington state to build its new 777X widebody plane, the latest
round in a long-running dispute between the U.S. and the European
Union over support for Boeing and Airbus Group SE.
Aircraft cases take years to resolve before the trade
organization but are closely watched as evidence of the
effectiveness of international rules. Donald Trump's election
victory and focus on trade are turning a new spotlight on such
cases, and sanctions from earlier WTO judgments involving the two
jet makers may start to be imposed next year.
The EU almost two years ago voiced concern at the WTO about the
support package for the 777X, a revamped version of Boeing's
existing 777 long-range plane. The updated model has attracted more
than 300 orders from carriers including Emirates Airline and
Deutsche Lufthansa AG.
The EU said Boeing had lined up more than $8 billion in
prohibited subsidies for the 777X program and that those subsidies
need to be immediately rescinded. U.S. officials have called the $8
billion figure inflated. The WTO isn't expected to put a value on
the tax break it is expected to strike down
The WTO is expected to deny most of the EU claims, but agree
that a key income-tax break offered by Washington state represented
a prohibited subsidy that would have to be withdrawn, the people
said.
Airbus and Boeing for years have accused the other of winning
business through illegal government subsidies. Each company
contends the other received several billion dollars in financial
backing that contravenes international trade rules.
The Geneva, Switzerland-based trade adjudicator in September
determined the EU had failed adequately to eliminate subsidies to
Airbus that the WTO earlier had deemed illegal.
At stake are potentially billions of dollars in tariffs the U.S.
and EU could impose on each other unless the WTO's subsidy concerns
are addressed. Those tariffs could be placed on goods and services
unrelated to aircraft or aircraft parts. The winning side isn't
obliged to impose tariffs.
The subsidy dispute dates back more than a decade. The two sides
settled a previous disagreement in 1992, but the U.S. walked away
from that deal in 2004, arguing Airbus had an unfair advantage.
The U.S. then brought a case to the WTO, alleging EU member
states illegally subsidized the Toulouse, France-based aircraft
maker. The EU quickly launched a similar case against the U.S.,
arguing that the U.S. illegally subsidized Boeing, the world's No.
1 plane maker by number of aircraft built.
The EU challenged the 777X tax break separately because the
program wasn't launched until the earlier cases were well under
way.
The entire subsidy case has been slow to move in part because of
its complexity, trade lawyers said. Resolving the issue could take
years. U.S. officials expect their ability to impose penalties on
Europe as part of the September ruling won't be achieved until late
next year.
The WTO also still needs to rule on whether the U.S. has taken
steps to reverse some handouts the trade body previously judged to
be in contravention of international trade rules.
The U.S. in September 2012 said it had addressed WTO concerns,
though the EU has challenged that assessment. A WTO judgment on
that matter is expected next year.
Write to Robert Wall at robert.wall@wsj.com and Doug Cameron at
doug.cameron@wsj.com
(END) Dow Jones Newswires
November 27, 2016 14:06 ET (19:06 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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