Boeing Co. received billions of dollars in illegal government subsidies, including $25 million in incentives that Illinois provided the plane maker to relocate its world headquarters to Chicago in 2001, a panel of the World Trade Organization determined.
The WTO report is confidential and was released to U.S. and European trade officials Wednesday. It is the first ruling in the second of dueling trade cases filed by the U.S. and European Union against each other last decade alleging that aircraft manufacturers had received unfair government support.
People briefed on the preliminary WTO report said the trade court panel determined that Boeing received market-distorting research and development aid from NASA and the Defense Department, tax-related export subsidies and tax incentives from the states of Illinois, Kansas and Washington.
Chicago-based Boeing would ultimately be required to repay any illegal incentives that were determined to have caused an adverse effect on competition for the European Union, which brought the trade litigation, or Airbus, sources said.
However, it could be years before the finding against Boeing is made final. The WTO panel must first file a final report in the case, which Boeing would then have the right to appeal. In the meantime, European officials are pushing the U.S. to drop the costly WTO litigation and to negotiate a new trade treaty spelling out permissible aid for aircraft manufacturing.
As diplomatic officials digested the ruling Wednesday, sources disagreed on the degree to which Boeing benefited from the aid.
Also uncertain was whether the finding was as sweeping as the court’s determination earlier this year that France-based Airbus benefited from about $20 billion in illegal subsidies, including $15 billion in below-market-rate launch aid in developing most of its commercial jetliners.
Boeing, in a statement made before the WTO report was issued, claimed that none of its incentives had “the market-distorting impact of launch aid nor even approach the sheer scale of the European subsidy practices.”
“It’s nothing comparable to the European launch aid,” said Loren Thompson, an analyst at the Lexington Institute, a conservative think tank whose clients include Boeing. “I think you would have to view this as a partial victory for Boeing.”
However, others noted that the illegal subsidies provided to Boeing also totaled in the billions of dollars and that the panel sided with the Europeans on all of their main claims.
“Today’s ruling provides us with the second half of the story,” said a European Commission official, who spoke on the condition that he not be identified since the report is confidential. “The EU has said all along that only negotiations at the highest political level can lead to a real solution, and we hope that today’s report provides momentum in that direction.”