Update, 6:45pm PDT: Dominic Gates of The Seattle Times updated his 12:45pm snippet eight minutes ago with far more detail, and as of this moment represents the most detailed news report we’ve seen.
As before, both sides are in major spin control, and as before, we will continue to withhold our judgment until the Final Report is issued months from now. But we will note that in the Airbus case when the Interim Report was issued, it turned out the USTR/Boeing spin was (in our judgment) more on target overall than was the EU/Airbus spin.
Update, 4:30pm PDT: Boeing issued a follow-up statement, reproduced after the jump following their advance statement.
Update, 3:00pm PDT: As we did when the US complaint against Airbus came out, we are largely withholding our commentary because we don’t have access to the Interim Report and neither do the Airbus and Boeing spin machines, nor the politicians.
We urge caution in drawing conclusions. The various updates below show the wide variations of what is contained in the reports and we are skeptical of what any vested interest has to say.
We will withhold any of our definitive opinions for what will amount to months, when the Final Report comes out next year.
Update, 10:15 AM PDT: The first actual detail of the WTO Interim Report has leaked, with the BBC providing this report. Boeing got $20bn in illegal aid, says BBC.
BBC reports that $4bn in Washington State tax breaks are part of these.
10:30 AM PDT: As with the Airbus case, both sides are claiming a win.
Update, 12:45 PM: The Seattle Times reports Reuters (and, apparently, the BBC) had the amounts of the illegal subsidies provided Boeing as vastly overstated, and closer to $3bn instead of the $20bn initially cited by Reuters and BBC. If this set of leaks is accurate, this would be a clear victory for the US and not Europe, giving the US essentially two major victories. This could also be a big relief for the State of Washington. Although Gates’ story doesn’t detail precisely what was found illegal, the amounts cited cast doubt on just how much–if any–of the State tax breaks were illegal.
Update, 2:45 PM: The Financial Times of London has a story (free registration required) that paints a very different picture than The Seattle Times and US Boeing partisans. The Financial Times puts specific numbers on the findings, including a reported $5.7bn of illegal subsidies on the Boeing 787 alone. This is more than The Seattle Times is quoting for the entire Interim Report, based on the information it received.
The specificity of the numbers in The Financial Times is important vs. the generalities of some of the other report and statements, including those of the USTR.
The long-awaited and thrice-delayed WTO Interim Report on the alleged illegal subsidies provided Boeing is due to be issued to the EU and US governments today.
The Interim Report is confidential, but leaks are expects, just as they were when the WTO issued the Airbus report. It will be months before the final, public report is issued.
Boeing has already issued a statement in advance of the report (see after the jump). We’ll follow this throughout the day.
For Washington State, the $3.2bn in tax breaks (over 20 years) provided Boeing for the 787 are expected to be a major part of the case.
Here are a couple of selected stories in advance of today’s events:
KIRO-TV (Seattle): Boeing rejects negotiations.
Wall Street Journal: Boeing likely to lose WTO ruling.
AFP (France): Titantic battle goes to the wire.
Reuters: EU Win unlikely to dampen US push over Airbus.
CHICAGO, Sept. 15 /PRNewswire/ — Boeing today released the following statement regarding the impending interim decision by a World Trade Organization (WTO) panel in DS 353, the formal complaint the European Union brought in 2006 against alleged U.S. government subsidies to Boeing:
“We expect the WTO later today to issue a preliminary ruling on charges the EU has made against various U.S. practices at the state, local and federal levels. This ruling follows an earlier final WTO ruling by a separate panel in June that unequivocally condemned European assistance to Airbus – notably the product-development subsidies known as launch aid – as illegal and harmful to U.S. aerospace interests.
“We look forward to learning how the WTO has ruled in today’s preliminary decision on U.S. practices, none of which have the market-distorting impact of launch aid nor even approach the sheer scale of European subsidy practices. In June, the WTO held in a case against the EU that Airbus had received illegal subsidies totaling more than $20 billion in principle. Launch aid, which represented the lion’s share of the involved illegal aid (roughly $15 billion), is unique to Airbus, unparalleled within U.S. industry, and – as the WTO has confirmed – harmful to U.S. aerospace interests and the American worker.
“To date, Airbus and its government sponsors have defiantly resisted abandoning launch aid. Media reports indicate that plans remain in place to provide billions of Euros of launch aid for the A350, a product that will compete with the Boeing 777 and 787. Unless that money is provided on full commercial terms, that would be an incomprehensible step in light of the recent ruling against launch aid and the outstanding obligation under WTO rules that Airbus repay the $4 billion in illegal launch aid it received for the A380, or restructure the A380’s financing to proven commercial terms.
“We have full confidence in WTO processes and its dispute-resolution procedures. The U.S. government’s actions in remedying European concerns with FSC/ETI last decade demonstrate its approach to obligations under WTO findings. Likewise, we fully expect Airbus/EADS and the EU to act in the same way, making good on their end of the WTO bargain.”
Update, 11:15 am PDT:
Today Guy Hicks, spokesperson for EADS North America, issued the following statement regarding the WTO report on Boeing subsidies:
“It has been widely reported that the WTO has found Boeing to be the beneficiary of anti-competitive and illegal subsidies. The report clearly validates the Department of Defense’s position, namely that ongoing commercial trade disputes between allies are irrelevant to defense acquisitions—including the KC-X tanker competition—and should not be used to circumvent the warfighter’s right to choose the system that best meets their requirements. This definitive finding by the WTO only reinforces the Department’s position.”
Boeing issued the following statement late Wednesday:
CHICAGO, Sept. 15 /PRNewswire/ — Boeing (NYSE: BA) today released the following statement, responding to public reports indicating that the WTO panel examining European Union allegations of U.S. government assistance to Boeing has issued a confidential interim ruling rejecting the vast majority of Europe’s claims:
“If today’s reports are accurate that some $3 billion of the EU’s claims were upheld by the WTO, excluding the claims that relate to past programs long ago remedied by Congress, then the ruling amounts to a massive rejection of the EU case and confirms that European launch aid to Airbus stands as the single largest and most flagrant illegal subsidy in the aerospace industry.
“Nothing in today’s public reports on the European case against the U.S. even begins to compare to the $20 billion in illegal subsidies that the WTO found last June that Airbus/EADS has received (comprised of $15 billion in launch aid, $2.2 billion in equity infusions, $1.7 billion in infrastructure, and roughly $1.5 billion in targeted research support).
“Nor are there seemingly any violations requiring remedy approaching the scale of remedy required of Airbus/EADS as a result of the WTO’s June ruling that European governments must withdraw and remedy the $4 billion in still outstanding illegal launch aid subsidies that Airbus/EADS received for the development of its A380. Billions must be repaid or restructured on proven commercial terms. And, equally, they must remedy the adverse effects of the other $16 billion in illegal subsidies, too.
“Neither do the public reports suggest that Boeing’s traditional market based approach to financing new aircraft development will need to change; a distinct contrast to the requirement that Airbus/EADS abandon its plans for financing development of new models such as the A350 through launch aid subsidies.
“Given the shape of today’s opinion, as it has been reported, the WTO findings against the US are likely to require few changes in U.S. policies and practices. One of the two principal matters that the WTO is reported to have cited as inconsistent with its rules was long ago remedied by the Congress: general US export tax policy embodied in FSC/ETI. That was litigated at the WTO and remedied last decade. As to the second principal matter – NASA research – we are heartened to read that, contrary to statements earlier today from European sources, three-quarters of the subsidies at issue were found to be wholly compliant with WTO rules.
“Today’s ruling underscores our confidence in the WTO processes and dispute-resolution procedures. We applaud the body for its work and continue to look to Airbus/EADS and the EU to recognize that in today’s global market, it is essential that everyone play by the rules and abide by the WTO requirements. Playing by the rules, for Airbus/EADS, means withdrawing their still-outstanding A380 prohibited launch aid subsidy and financing the A350 on commercial terms.”