Boeing and Airbus Await Game-Changing WTO Ruling

March 12, 2012

A monumental trade battle regarding subsidies and loans by governments to aircraft manufacturers Boeing (NYSE:BA) and Airbus, a powerful trans-Atlantic duopoly, may end in an unfavorable outcome for Boeing on Monday.

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Last year, a World Trade Organization panel ruled that Boeing was the beneficiary of about $5.3 billion in federal tax breaks and research contracts craftily and illegally routed through NASA. The ruling, appealed by the United States, may now be broadly upheld by WTO appeals judges in their verdict Monday.

The spat has the distinction of being the largest trade dispute ever, and involves Europe and the United States ranged against each other, with mutual accusations of unfair trade subsidies and loans being thrown at both Airbus and Boeing. The first salvo was apparently fired by the United States, which complained that the European Union had subsidized Airbus for decades. The EU shot back with its own claim on the United States and its subsidies to Boeing.

The appellate body’s ruling has been delivered to both sides. “It won’t change much, but there may be some changes around the edges of the decision,” a U.S. source told reporters.

However, the ruling may have little impact, as the two aircraft manufacturers have been less than compliant with WTO rulings in the past.. “I think they (Boeing) can do a lot to disregard the ruling just as Airbus has been able to do an awful lot to disregard any ruling against them,” said aerospace analyst Richard Aboulafia of Teal Group.

The dispute is unlikely to resolve soon, and has already cost $100 million in legal expenses and travel to and from WTO Geneva, with little to show for it.

“It’ll be the usual. Both sides will claim victory. Both sides will vow to fight on. And exactly nothing can be accomplished at this point,” Aboulafia said.

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To contact the reporter on this story: Alex Capel at staff.writers@wallstcheatsheet.com

To contact the editor responsible for this story: Damien Hoffman at editors@wallstcheatsheet.com