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WTO Scolds Boeing On Subsidies

The world's two largest aircraft manufacturers have fought yet another round in their six-year legal and political battle over trade subsidies. On Thursday, a World Trade Organization panel said American aircraft manufacturer Boeing received billions of dollars in illegal U.S. government aid. Boeing's chief executive insisted the ruling was actually a victory for the U.S.-based firm.

For six years, U.S.-based Boeing and European rival Airbus have accused each other of receiving illegal subsidies from their respective governments in the longest-running and most complicated dispute in the history of the World Trade Organization.

This time it was Boeing's turn to be scolded by the WTO, which ruled that Boeing received more than $5 billion in illegal subsidies from the U.S. government to build and develop new aircraft.

The finding supported parts of a complaint from Airbus, which said research and development contracts from the U.S. space agency and the U.S. military, along with tax breaks from a state where Boeing has factories, were unfair.

Airbus officials said the WTO ruling was "a massive condemnation" of U.S. practices that cost them tens of billions of dollars in sales.

Last year, a separate WTO panel condemned European government support for Airbus. Thursday, Boeing's chairman, James McNerney, said the European subsidies were larger, and therefore worse, than the U.S. actions.

"A dramatic victory for the U.S. I mean $20 billion in subsidies identified in Europe, $3.7 billion in the U.S. The $3.7 billion in the U.S. is stuff that happened 20 years ago. We have all stopped doing it," he said.

Under global trade rules, governments are not supposed to give companies in their countries an unfair advantage over competing foreign firms with tax breaks, below-market rate financing or other kinds of help. In theory, if companies compete on price and quality, consumers will obtain better products at lower prices. Subsidies distort that competitive process.

The bitter Boeing-Airbus dispute is just part of a global web of contentious trade issues. These include Washington and Beijing haggling over currency issues, stalled talks over farm subsidies involving many nations, and bickering between the Obama administration and some members of the U.S. Congress over proposed free trade agreements with Colombia, Panama and South Korea.

The chairman of the U.S. Export-Import Bank, Fred Hochberg, says trade negotiations are particularly tough in the wake of the economic crisis and because jobs, pride, and prosperity are at stake.

"Every country around the globe is looking to add jobs and employment for their workers, so I think you do have some of that competitive force playing itself out, as well as American companies that are competing more with Chinese companies, German companies, Italian French, British. So, it is a very competitive global market place," he said.

In the meantime, the Airbus-Boeing dispute seems likely to continue because one or both of the rivals could appeal this latest decision.