Boeing state subsidy ruled illegal by WTO

The World Trade Organisation has ruled that state subsidies given to US plane-maker Boeing were illegal and must be paid back.

The decision is the latest in a long-running battle between Boeing and rival Airbus, which involves the United States and the European Union also. The sum the company would owe for repayment could be as high as $9bn.

The subsidy in question was given by Washington state, the home to huge Boeing factories in Everett and Renton, and was used to finance the development of its 777X aircraft.

The US has been given 90 days to drop a special tax exemption provided for Boeing to ensure the wings for the planes were made in the state.

However, six of the seven different state tax incentives that were challenged by the EU were thrown out by the WTO.

Boeing responded with a statement which downplayed the nature of the incentives. "The WTO found in September that Airbus has received $22 billion in illegal subsidies from the EU and that without these subsidies neither Airbus itself nor any of its airplanes would even exist today. By contrast, in rejecting virtually every claim made by the EU in this case, the WTO found today that Boeing has not received a penny of impermissible subsidies," the plane-maker said.

In September, Airbus was found to have received illegal subsidies in the form of low interest loans from the government, a victory celebrated by Boeing at the time.

Legal teams from both sides have been engaged in a long battle to prove the other's anti-competitive practices since 2004, and it doesn't look as if the conflict will be easily resolved yet.

With the two companies dominating the sector alongside limited competition in the last decade, they have been able to sustain the costly trade war, but considering the possible emergence of a competitor in the form of Chinese-backed Comac, they may have to rethink their options.

The election of Donald Trump may not help to put an end to the trade war, with his isolationist policies likely to increase the tension between the US and Europe.

The civil aviation market is forecast to be worth $6trn over the next 20 years, and although Boeing and Airbus show no signs of letting the issue go as of yet, both will know that it is a damaging drain on their finances and resources and may lead to further loss of business to emerging rivals.