Editorial: Win or lose, Boeing knows its better off with WTO as referee

By The Herald Editorial Board

You can’t call the process speedy, but the World Trade Organization’s referee role in disputes between Boeing and its largest competitor, Airbus, could ultimately be effective in setting some lasting ground rules not only for an expanding aerospace industry but covering all issues of global trade.

At a time when President-elect Donald Trump has threatened tariffs against China and Mexico and has pledged to scuttle an 11-nation trade pact among Pacific Rim nations and renegotiate NAFTA, that could provide some clarity and certainty, particularly for a state like Washington that is heavily dependent on trade.

Boeing was most recently on the winning end of a WTO ruling.

In September, the WTO’s compliance panel ruled in a case stretching back to 2004 that the European Union had failed to comply with an earlier WTO decision. That 2010 decision said Airbus had benefited from illegal subsides that, among other programs, helped it launch its A350, which competes directly with Boeing’s 777 and 787 jetliners and the A380 superjumbo, which competes with the 747. In all, the WTO said, Airbus was aided by $22 billion in illegal subsidies and resulted in lost orders for Boeing of 50 777s or 787s, 54 747s and 271 737s.

That’s a significant amount of potential lost work for Boeing employees in Everett, Renton and throughout the U.S.

European Union and Airbus officials spun the significance of the ruling, claiming it was just another quarter-turn in a long process of decisions, appeals and counter complaints between the U.S. and the European Union on behalf of the aerospace giants.

But the September decision, while long in coming, provides a end point for Boeing’s initial complaint and it provides the U.S. some leverage in persuading the European Union to change the policies that provided what Boeing and the WTO consider unfair assistance in launching the A380 and A350, which the WTO’s ruling said would not have made it to market without the subsidies.

Under the WTO framework, the U.S. can now impose tariffs and other penalties, less to recoup what has been lost but more to persuade the EU to change its policies.

Boeing officials, including Ted Austell, vice president for executive, legislative and regulatory affairs, has seen that persuasion work in a previous WTO case that went against Boeing. The EU used a rotating “carousel” of tariffs that, when they reached agricultural states, persuaded those states’ members of Congress to adapt policy to comply with the WTO decision.

The EU and Airbus have their own complaints pending against the U.S. and Boeing, although there are differences in scale and response.

The EU charged and the WTO ruled that Boeing benefited from research and development assistance from NASA and the Department of Defense and other aid that amounted to $3.25 billion in illegal subsides. Unlike in the September case, U.S. trade officials have said the nation has changed policy to comply with that WTO ruling. The trade organization is expected to report on whether the U.S. has complied later in spring.

The EU also has filed a complaint that Washington state’s $8.7 billion tax incentives package that helped secured the 777X program for Everett and the state, is an illegal subsidy. An initial decision from WTO is expected in a matter of weeks.

Don’t be surprised if U.S. trade officials and Boeing seek an appeal in that decision; it’s part of the process. But in meeting this week with The Herald Editorial Board, Boeing Commercial Airplane officials, including Austell; Bill McSherry, vice president of governmental operations; and Tim Neale, director of communications and public policy, made clear their respect for the part that WTO plays as a referee.

The WTO has no authority beyond what its member nations allow it, but its benefits are available only to those who play by its rules, they said. WTO decisions, favorable or unfavorable, are much preferred to trade wars.

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