In the latest chapter of a 12-year-old trade dispute over allegedly anti-competitive government funding of civil aircraft, the World Trade Organization on Monday ruled that tax breaks given to Boeing for the 777X program constitutes and illegal subsidy subject to sanction. The ruling, issued by a WTO panel requested by the European Union in February last year, concludes that tax measures to which the EU objected constitute an illegal subsidy. As expected, Airbus applauded the ruling, calling the tax incentives granted by Washington state large enough to fund the entire development of the 777X and worth $50 billion in lost sales to Airbus.

“The United States picked this fight at the WTO, and today’s ruling is yet another blow for that strategy, said Airbus Group CEO Tom Enders. “Those prohibited subsidies must be withdrawn immediately following today’s historic ruling, meaning that Boeing must give up these massive tax subsidies.”

The ruling, said Airbus, now brings to $26 billion the value of “pure grants” to Boeing, including those cited by the WTO in 2012 related to other programs.

“The earlier WTO rulings had already confirmed that [the] 787 was the most highly subsidized aircraft in the history of aviation,” said Airbus CEO Fabrice Bregier. “Today’s report leaves no doubt that Boeing has gone even further. The 777X will not cost Boeing a single dollar to develop thanks to Washington State’s taxpayers...the United States Trade Representative should take immediate action.”

For its part, Boeing cited wording in the ruling that indicates the WTO entirely rejected the EU’s challenge of six of the seven tax incentives in question and rejected most of the challenge to the seventh, which involved the state’s Business and Occupancy tax rate for future 777X revenues. Of the $8.7 billion in illegal subsidies claimed by Airbus, the WTO found that no more than $50 million a year worth of incentives were inconsistent with international trade rules. “The WTO found that to date Boeing has received no benefit from the 777X rate incentive, and will not until 2020, because the first airplane will not be delivered until then,” said Boeing in a statement issued Monday.

“Today's decision is a complete victory for the United States, Washington State and Boeing,” said Boeing general counsel J. Michael Luttig. “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 September ruling to which Luttig referred covered launch aid for the development of virtually all Airbus’s airliner projects and certain equity infusions by France, Germany, Spain and the UK. The ruling also covers certain infrastructure measures provided to Airbus, namely, the lease of land at the Mühlenberger Loch industrial site in Hamburg, the right to exclusive use of an extended runway at Bremen Airport, regional grants by the German authorities in Nordenham, and Spanish government grants and regional grants by Andalucia and Castilla-La Mancha in Sevilla, La Rinconada, Toledo, Puerto Santa Maria and Puerto Real.