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.
The ruling may also influence a separate competition between Boeing and EADS to sell the U.S. Defense Department as many as 179 tanker airplanes for about $30 billion. EADS is offering a variant of its A330 passenger jet, an Airbus model the WTO said was improperly subsidized.
Boeing and Airbus operated under a 1992 deal on government aid until the U.S., under pressure from Boeing, renounced the pact in 2004 and took the EU to the WTO over support to Airbus.
The EU retaliated by filing a similar case against the U.S. It is that case the WTO is expected to decide on Wednesday.
Officials from both sides have since said they want to talk, but have been unable to agree on terms for meeting. Europeans, in particular, have said they wouldn’t negotiate in the period between the release of the two WTO rulings.
In a recent interview with The Wall Street Journal, EU Commissioner for Trade Karel De Gucht said the U.S. and EU should negotiate a settlement because other countries are putting government money in the industry. “It is obvious you can’t build a plane without public support,” he said.
U.S. trade representative Ron Kirk has said the U.S. is also prepared to negotiate.
The WTO’s ruling last September, stating European governments had improperly loaned Airbus billions on preferential terms, was a publicity coup for Boeing. EU officials have been frustrated because the ruling involving aid to Boeing has been delayed by many months.
European officials say that Boeing received almost $24 billion between 1989 and 2004 from the Pentagon, the U.S. National Aeronautics and Space Administration and tax breaks from the states of Kansas, Washington and Illinois.
Simply receiving government money isn’t illegal in the WTO. The general rule for evaluating the legality of a subsidy is whether it benefited a specific company or industry — and hurt a rival company.
