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2014 Media Kit

US likely to appeal WTO ruling on Boeing subsidies

By: | at 08:00 PM | International Trade  

The Obama administration is almost certain to appeal a World Trade Organization ruling that Boeing received illegal subsidies as a long-running spat moves into its next stage, lawyers and analysts said.

“I would be truly surprised if the U.S. did not appeal,” Gary Hufbauer, an analyst at the Peterson Institute for International Economics said.

The March 31 decision by a WTO panel was the latest in a transatlantic legal battle over government support for Boeing and its European rival Airbus. The panel said Boeing had received at least $5.3 billion in illegal subsidies, including tax breaks and research funding from NASA.

The European Commission hailed the ruling as a “clear-cut victory.” But the United States said the decision vindicated its position that Airbus had got far more support over the years, since an earlier panel found the European manufacturer had received more than $20 billion in illegal subsidies.

Hufbauer said it was unlikely the United States would accept the Boeing decision to put pressure on the EU to accept the Airbus ruling, which both sides have appealed.

Timing Advantage on Sanctions
The WTO appellate body is expected to issue its decision in the Airbus case in late April, although decision dates frequently slip at the WTO.

Once that ruling comes, the United States will have a timing advantage in the dispute because the EU could soon face U.S. retaliation if it does not move quickly to eliminate any subsidies left standing by the appellate review.

However, many analysts believe the two sides will eventually negotiate a settlement, rather than hurl sanctions potentially affecting billions of dollars in trade.

A deal also would bolster U.S. ties with Europe at a time when both face increased competition from major emerging economies such as China, India and Brazil.

The European Union, unhappy with some aspects of the decision it won against Boeing, immediately launched an appeal that it hopes would show even more subsidies.

That initially was expected to require the United States to decide within five days whether to file its own appeal.

But the WTO appellate body temporarily suspended the deadline to establish procedures to protect confidential information that must be supplied in the case. It is expected to give the United States a new deadline in the coming days.

John Magnus, president of TRADEWINS, a trade law and policy consulting firm, said the United States had both defensive and offensive reasons to appeal.

If the ruling can either only “stay the same or get worse, that’s not a good situation,” Magnus said. In addition, some of the panel’s reasoning appears vulnerable, he said.

That involves more than $2 billion in subsidies stemming from a much older dispute between the United States and the EU over U.S. tax breaks for exporters.

Although the United States repealed the program after an adverse WTO ruling, it did not revoke subsidies in existing contracts for Boeing and other exporters, Magnus said.

The latest WTO panel agreed the tax breaks were a subsidy but did not recommend the United States take any action because they were covered by the previous dispute.

However, it relied on a combination of the federal tax breaks and Washington state and local subsidies to find “serious prejudice” against Airbus in two small and large airplane product categories, Magnus said.

“If that were reversed, then what we would be left with is a finding of serious prejudice only in the middle category, the 200- to 300-feet wide body plane,” Magnus said.

That would be an “even more attractive situation” for the U.S. government than the current ruling, he said. (Reuters)