A World Trade Organisation panel has ruled against a tax break for the Boeing 777X programme, as both airframers claimed vindication in the latest ruling in the long-running spat over support for large aircraft manufacturers.
In a ruling today the WTO adjudged that one of the the tax amendments applying in Washington state relating to Boeing's 777X programme was inconsistent with the existing Subsidies and Counterveiling Measures (SCM) Agreement.
Airbus said the "historic" ruling was a "knockout blow" for Boeing, but the US manufacturer responded by calling the WTO decision to reject six of the European complaints and a portion of the seventh "a complete victory" for the US side.
It comes after at WTO Panel in September ruled subsidies granted for a host of Airbus programmes pre-dating the A350 have yet to be remedied.
The latest strand announced today to the long-running dispute relates to legislation enacted in Washington state three years ago, amending and extending various tax incentives for the aerospace industry.
The European Union had challenged seven tax incentives it argued that were prohibited under the SCM Agreement, arguing the aerospace tax measures are contingent - both in terms of the text and de facto - on the use domestic over imported goods.
The WTO ruled the EU had not demonstrated that the text on its own made the tax measures contingent upon the use of domestic over imported goods
But the panel found that the EU has demonstrated that the business and occupation aerospace tax rate for the manufacturing or sale of commercial airplanes under the 777X programme, is a subsidy contingent upon the use of domestic over imported goods. "Accordingly, taking into account the nature of the prohibited subsidy found in this dispute, the panel recommends that the United States withdraw it without delay and within 90 days," the report states.
Airbus Group chief executive Tom Enders says: "The United States and Boeing picked this fight at the WTO, and today’s ruling is yet another blow for that strategy. Those prohibited subsidies must be withdrawn immediately following today’s historic ruling, meaning that Boeing must give up these massive tax subsidies.”
Airbus argues this, adding to earlier WTO rulings, means federal, state and local governments in the USA are providing $26 billion inconsistent subsidies to Boeing.
"The 777X will not cost Boeing a single dollar to develop thanks to Washington State’s taxpayers," says Airbus president Fabrice Bregier. "We estimate the damage to Airbus and the European aerospace industry in the region to be $50 billion so far, and that’s only for the 777X."
Boeing however pointed to the rejection of the majority of the EU's challenges. "In total, the EU claimed that Boeing had received $8.7 billion in subsidies. This claim was rejected by the WTO, which found future incentives totaling no more than $50 million a year to be impermissible," it says.
Boeing's general counsel Michael Luttig calls the decision "a complete victory for the United States, Washington State and Boeing".
He adds: "The WTO found in September that Airbus has received $22 billion in illegal subsidies from the EU and that without these subsidies neither Airbus itself nor any of its airplanes would even exist today. By contrast, in rejecting virtually every claim made by the EU in this case, the WTO found today that Boeing has not received a penny of impermissible subsidies."
Both sides can appeal the latest ruling. "After any appeal we fully expect Boeing to preserve every aspect of the Washington state incentives, including the 777X revenue tax rate," says Luttig.
The long-running row over the legality of support for Airbus and Boeing's large aircraft programmes had simmered for many years before escalating to the WTO with claim and counter-claim from the USA and the European Union in 2005. There have since been a succession of panel rulings, appeals and follow-up claims.
Source: Cirium Dashboard
