Reuters reports that the World Trade Organization (WTO) is nearing decisions on whether Airbus and Boeing complied with previous rulings to fix subsidies the WTO found were illegal in the production of their commercial airliners.
In the meantime, the United Kingdom’s Serious Fraud Office (SFO) investigation into improper use of consultants by Airbus appears to be spreading to the US Department of Justice, according to press reports.
Boeing is not without its own problems. The Us Securities and Exchange Commission is said to be probing alleged improprieties in its use of program accounting for the 787 and 747-8. Program accounting is an approved method of cost accounting. The reported SEC probe is looking into whether Boeing improperly applied costs in the two aircraft programs.
The Airbus and Boeing complaints to the WTO (officially these are complaints by the US Trade Representative about Airbus and the European Union about Boeing) date to 2004. Boeing complained that Airbus received tens of billions of dollars in illegal subsidies from its member states. The WTO agreed on many of Boeing’s complaints. Both sides argued just how many complaints were upheld and how many were dismissed.
Airbus subsequently filed a counter-complaint about Boeing’s “subsidies.” The WTO upheld some complaints and rejected some. As with the Boeing complaint, both sides argued over the outcome.
The EU appealed the WTO’s ruling. Although former Boeing CEO Jim McNerney said at one point Boeing would repay the subsidies if the WTO found any to be illegal, it did not. Instead, the USTR appealed.
Now both sides complained the other isn’t in compliance with the WTO rulings. Airbus said it complied, and that new “launch aid” for the A350 XWB was structured to comply. Boeing (the USTR) didn’t file a complaint about this launch aid (as far as we know).
Airbus (the EU) complained that Washington State’s tax breaks extended for the 777X were illegal. These $8.7bn in tax breaks were an extension of $3.2bn in tax breaks provided in 2003 for the 787 program, which were found to have illegal elements. At the time of the 777X tax breaks, LNC complained that the State was using illegal tax breaks for the 777X. State officials fell back on the appeal of the WTO decision as cover.
Both sides are awaiting WTO rulings that could lead to authorization for the US and the EU to impose penalties for non-compliance. If authorized, the governments don’t have to impose penalties on Airbus and Boeing. Under WTO rules, penalties may be imposed on unrelated industries. Thus, theoretically the US could levy penalties on French wine and the Europeans could levy penalties on Washington State apples.
It’s a bizarre set of rules that allows innocent third parties to suffer.