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IP/04/1191

Brussels, 6 October 2004

US-Boeing: EU takes US to the WTO over subsidies granted to Boeing

Today, the EU has requested consultations with the United States in the World Trade Organization (WTO) on massive subsidies granted to Boeing. The EU believes that these subsidies are in serious violation of the WTO Agreement on Subsidies and Countervailing Measures. The US launched a case regarding European support to Airbus earlier in the day. EU Trade Commissioner Pascal Lamy stated: “The US move in the WTO concerning European support to Airbus is obviously an attempt to divert attention from Boeing’s self-inflicted decline. It also shows that the US were never seriously interested in seeking to renegotiate the existing 92 EU-US Bilateral Agreement. . If this is the path the US has chosen, we accept the challenge, not least because it is high time to put an end to massive illegal US subsidies to Boeing which damage Airbus, in particular those for Boeing’s new 7E7 programme. Nonetheless, it is a pity that the US has chosen to go to litigation which could destabilize trade and investment, including in Boeing’s 7E7 project. Aerospace workers can rely on the European Commission to defend their interests. ”

For many years the US Government has subsidised Boeing, mainly by paying research and development costs through NASA, the Department of Defence, the Department of Commerce and other government agencies. Since 1992 Boeing has received around $ 23 billion in US subsidies. Moreover, the US Government continues to grant Boeing around USD 200 million per year in export subsidies under the Extraterritorial Income Exclusion Act (the successor to the “FSC” - Foreign Sales Corporations legislation), despite a WTO ruling expressly declaring these subsidies illegal.

The latest and most flagrant violation consists in massive subsidies of about US $ 3.2 billion, inter alia in the form of tax reductions and exemptions and infrastructure support for the development and production of Boeing’s 7E7, also known as “Dreamliner”. The evidence the European Commission has collected over the years clearly demonstrates that the above subsidies violate the WTO Agreement on Subsidies and Countervailing Measures.

Moreover, they also violate the 1992 EU-US Agreement on Trade in Large Civil Aircraft which regulates precisely the forms and level of government support the US and the EU provide to Boeing and Airbus respectively.

Despite repeated invitations by the Commission, the US has declined to participate in the bilateral consultations stipulated by the 1992 Agreement for more than two years.

Nonetheless, further to a US request only a few weeks ago, the Commission agreed to discuss the question of a possible revision of the 1992 Agreement provided that this would cover all forms of subsidies including those used in the US, and that the US would bring any subsidies for the Boeing 7E7 into conformity with the 1992 Agreement.

Finally, and just when these discussions were taking place (most recently in a constructive meeting on 16 September), the US requested WTO consultations on European support to Airbus. This suggests that the US request for re-negotiation of the 1992 Agreement was never particularly serious.

WTO consultation and dispute settlement procedures

The first step in a WTO dispute settlement is a request for consultation from the complaining member. The defendant has 10 days to reply to the request and shall enter into consultation within a period of no more than 30 days (unless otherwise agreed by the 2 parties). The consultation should aim at finding a positive solution to the issue at stake.

If the consultations fail to settle the dispute within 60 days after the date of receipt of the consultation request, the complaining party may request the Dispute Settlement Body (DSB) to establish a Panel (however, the complaining party may request a panel during the 60 day period if the 2 parties considers that the consultations have failed to settle the dispute).

Once the panelists are nominated, the complaining party has normally between 3 and 6 weeks to file its first written submission and the party complained against another 2/3 weeks to respond. Two oral hearings and a second written submission follow. On average a panel procedure lasts 12 months. This can be followed by an appeal that should not last longer than 90 days.

For more information:

http://ec.europa.eu/trade/issues/sectoral/industry/aircraft/index_en.htm

http://ec.europa.eu/trade/issues/respectrules/dispute/index_en.htm


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