Boeing Likely To Lose WTO Ruling [company received illegal subsidies]

THE WALL STREET JOURNAL WSJ.com ^ | Sep. 15, 2010 | Michaels, Daniel and Miller, John W.

[wolf78]

BRUSSELS—The World Trade Organization is likely to rule Wednesday that Boeing Co. received some illegal subsidies from the U.S. government, said people familiar with the case, fueling the debate with European rival Airbus and opening the door to negotiations on state support to plane makers.

The preliminary, confidential WTO finding will come more than one year after the WTO ruled in a similar case that Airbus had benefited from illegal European subsidies.

The European Union alleges that Boeing benefited from some $24 billion in tax breaks, research aid and export rebates from U.S. federal and state governments.

Boeing officials say any finding of violations will be less significant than the ruling against Airbus, a unit of European Aeronautic Defence & Space Co.

Both sides are likely to declare victory in the complex case, as they did last year. But the U.S. is widely perceived to have prevailed in its case against Airbus, so EU officials could feel pressure to prove that the WTO's new ruling against Boeing is as severe, trade experts said.

"Boeing clearly won its case, even if it can still be appealed. Now the question is how much did Airbus win?" said Simon Lester, founder of WorldTradeLaw.net LLC, a Washington-based consultancy that isn't involved in the cases.

Either way, the report will give the rivals a clearer sense of how governments may legally support plane makers.

Executives at Boeing and Airbus have said they would like a global set of rules that eventually covers emerging rivals in Canada, Brazil, Japan, Russia and China.

[wolf78]

Pot, meet kettle.

[screaminsunshine]

Too bad when the company that built the B-52 has to cow Tow to some foreign government agency.

[VAFreedom]

since airbus got the same ruling, i guess they are no winners.

they need to realize that this industry probably needs subsidies for research.

[wolf78]

You can read the whole text, if you access it via Google news: http://www.google.com/#sclient=psy&hl=en&safe=off&tbs=nws%3A1%2Csbd%3A1&q="boeing+likely+to+lose+ruling"

[rockinqsranch]

So if the New World Order World Trade Organization of the United Nations rules against Boeing, I suppose a precedent is set that WE MUST abide by?

Eff the NWO, WTO, UN. They mean nothing to us other than another problem to fix.

[DoughtyOne]

I believe that would be Cow WTO. ;^)

[RC2]

Let Boeing build their planes for the US. If other countries want to buy them, let them deal with the WTO. Other countries can build whatever they want. They can’t compete with Americans if our people put their minds to it. We need out of the WTO.

[wolf78]

So if the New World Order World Trade Organization of the United Nations rules against Boeing, I suppose a precedent is set that WE MUST abide by?

Of course not, neither must the EU. The whole shenanigans started when Boeing got its lobbyists to get Washington to press the case against Airbus before the WTO in the first place. Of course Brussels countersued. And in the end both sides were found guilty. Which Boeing should have known in the first place. If the US and the EU are smart they now reach a comprehensive deal as to which kind of subsidies are ok and which are not, more or less codifying the status quo. This will allow them to set the terms China and Russia will have to abide by for the coming decades.

If they are morons (and there's a good chance they are), they will start a trade spat and China will use the WTO precedent against the west ten years down the line when it has a competitive aviation industry of its own.

[rockinqsranch]

“...We need out of the WTO.”

Out is right. Out of the UN. One of the most unnecessary organizations ever created. It was of Communist influence at the outset, and still is. To “H” with the UN. To “H” with their WTO, and every other ‘whatever’ they sponsor.

[DesertRhino]

The WTO crowd must be really happy! A court in Brussels, can dictate American government policy regarding Boeing. Meanwhile, Airbus will continue nearly being a state subsidized/owned company,,, and of course, Brussels will have no issue with that.

Im for free trade,, but WTO, NAFTA, and associated courts, are a disaster for our sovereignty. Yes, we should ABSOLUTELY have free trade. But it should be nation by nation, 100% reciprocal, and true free trade. Any nation would be completely free to set their own conditions for trade with us. They can have the level of access they give us.
This does not require an international governing body.

[DesertRhino]

The WTO crowd must be really happy! A court in Brussels, can dictate American government policy regarding Boeing. Meanwhile, Airbus will continue nearly being a state subsidized/owned company,,, and of course, Brussels will have no issue with that.

Im for free trade,, but WTO, NAFTA, and associated courts, are a disaster for our sovereignty. Yes, we should ABSOLUTELY have free trade. But it should be nation by nation, 100% reciprocal, and true free trade. Any nation would be completely free to set their own conditions for trade with us. They can have the level of access they give us.
This does not require an international governing body.

[Da Coyote]

Death to the WTO and the UN.

Oh, and take Islam with you.

[wolf78]

Let Boeing build their planes for the US. If other countries want to buy them, let them deal with the WTO. Other countries can build whatever they want. They can’t compete with Americans if our people put their minds to it. We need out of the WTO.

Boeing clearly does not want to do that. If you look at GDP growth and population dynamics, such would mean ceding 80+ % of the worldwide market to Airbus. There is a reason Boeing outsourced as much as 70% of new plane airframe production: Because the markets of the future are outside the US. It is easier to stomach the $10-15 billion development costs of a new airliner if your potential market is 3 billion people and not just 300 million.

The thing is Boeing wanted to have its cake and eat it, too. I.e. get subsidies AND be a global player.

[DesertRhino]

“get subsidies AND be a global player.”

Unlike that paragon of free markets, who is utterly unsubsidized,,,Airbus? Please,,,

[wolf78]

The WTO crowd must be really happy! A court in Brussels, can dictate American government policy regarding Boeing. Meanwhile, Airbus will continue nearly being a state subsidized/owned company,,, and of course, Brussels will have no issue with that.

The WTO is in neutral Switzerland, not Belgium. And no, the WTO cannot really dictate anything. And the US / EU can of course choose to ignore the rulings against Airbus and Boeing, respectively. But why did the US a few years ago bring the case before the WTO in the first place?

Im for free trade,, but WTO, NAFTA, and associated courts, are a disaster for our sovereignty. Yes, we should ABSOLUTELY have free trade. But it should be nation by nation, 100% reciprocal, and true free trade. Any nation would be completely free to set their own conditions for trade with us. They can have the level of access they give us.

I wish it were so, but the US hasn't exactly a stellar record when it comes to absolutely free trade, either. For example, take airlines. Not only did the US bail out its national airlines after 2001, giving them a competitive advantage, while the EU did not. Also, the EU already grants US airlines more freedoms in its airspace than the other way round. Can Lufthansa buy JetBlue fully or operate flights within the continental US? No, it can not. The EU is currently offering completely open skies to the US, i.e. freedom to operate flights from anywhere and no restrictions on ownership for both sides. In this case it is the US that is stonewalling / being protectionist.

[DManA]

For crying out loud, Air Bus is OWNED by European governments.

[wolf78]

For crying out loud, Air Bus is OWNED by European governments.

You mean like GM is owned by the US? But no, it is not.

Airbus is a wholly owned subsidiary of Dutch European Aeronautic Defence and Space Company N.V. (EADS). Approx. 49.5% of EADS is traded openly on European stock exchanges (i.e. you, too, can become a shareholder if your bank trades on Euronext, the Frankfurt Stock Exchange or the Bolsa de Madrid), 15% is owned by Daimler AG (of Mercedes Benz fame), 7.5% by a consortium of German investors, another 7.5% by French Largadere Group, 15% by the French government and the remaining 5.5% by the Spanish Government. So yes, about a fifth of Airbus is state-owned. But not the whole company.

[businessprofessor]

You make an excellent point. Other countries have just as many complaints about our trade practices as we have about theirs. The tables have turned with US competitiveness lagging and foreign competitiness increasing.

In airplane development and manufacturing, the subsidies have been one-sided. Boeing perhaps receives subsidies on its defense side that may confer some advantages on its commercial side. Airbus subsidies are direct and massive. Without the subsidies, Airbus would not have been able to build its planes. Airbus has a substantial defense side also that it receives subsidies. The value of the Airbus sudsidies dwarf the Boeing subsidies.

[wolf78]

In airplane development and manufacturing, the subsidies have been one-sided. Boeing perhaps receives subsidies on its defense side that may confer some advantages on its commercial side. Airbus subsidies are direct and massive. Without the subsidies, Airbus would not have been able to build its planes. Airbus has a substantial defense side also that it receives subsidies. The value of the Airbus sudsidies dwarf the Boeing subsidies.

Boeing not only gets federal subsidies on its defense side, but also more direct subsidies from states like e.g. Washington. Also the work that Boeing outsources to e.g. Japan is heavily subsidized. So I think you forget part of the equation. The main argument against Airbus is that the risk-sharing public loans (i.e. the loans are forgiven if the plane proves a total flop) it gets are unfair and I totally agree with you on that. But I would not be able to put an exact price on how much each kind of subsidy is actually worth to the respective company, so to say to tally up a total sum of who is the worst.

What baffles me is the stupidity of this whole affair. Whenever you have large defense contractors in strategically important industries, you will run into problems with subsidies. Which is terribly socialist, but a political reality. I cannot understand how one side seriously believed it could clearly "win" such a dispute before the WTO. And how politicians bought into that line of argument instead of hammering out an agreement that allows both sides to save face.

[businessprofessor]

You make some good points but I still contend that Airbus subsidies dwarf Boeing subsidies. This dispute does not involve Japan so Japanese subsidies are not on the table. Airbus has many foreign partners that probably receive subsidies also. The state and local subsidies are not on the table also. Airbus undoubtedly receives these subsidies also. If it is debatable if incentive programs are subsidies. Incentives are mostly negotiated tax rates with the idea that employment will boost losses in tax rates. Unless you want to argue that reductions in tax rates are subsidies, the state and local incentives do not seem like subsidies.