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EU challenges United States' failure to remove illegal subsidies in Aircraft Trade Dispute

Commission Européenne - IP/12/1095   11/10/2012

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European Commission

Press release

Brussels, 11 October 2012

EU challenges United States' failure to remove illegal subsidies in Aircraft Trade Dispute

The EU today requested the establishment of a World Trade Organization (WTO) compliance panel to address the failure of the United States to remove WTO-inconsistent subsidies to Boeing in the DS 353 case, as it was required to do following the decision by the WTO in March 2012.

Last month, the US claimed to have removed the WTO inconsistencies, but provided no detailed evidence to support its claims. Rather, it is now clear for the EU that the US has not only failed to properly implement the decision of the WTO but it has even provided new subsidies to Boeing. The recent consultations held between the EU and the US failed to resolve this dispute.

"The United States' failure to end aircraft subsidies continues to cost European aerospace companies billions of euros in lost revenue" said EU Trade Commissioner Karel De Gucht. "By taking action today, the European Union continues to ensure that every one of our trading partners plays by the rules, and that every effort is made to create a level playing field for European companies and workers."

The panel will consider Europe's assertion that the US has not met its obligations to the WTO to remove the illegal subsidies to Boeing or their adverse effects.

Background

In March 2012, the Dispute Settlement Body of the WTO adopted the Appellate Body report, giving six months to the US to either withdraw these illegal subsidies or remover their adverse effects.

The WTO's Appellate Body found that US Federal and State governments granted between US$ 5 and 6 billion WTO-incompatible subsidies to Boeing, between 1989 and 2006. Subsidies to be granted after this date are estimated to be at least US$3.1 billion.

  • The Appellate Body DS 353 on Measures Affecting Trade in Large Civil Aircraft ("Boeing") confirmed several of the key findings of the Panel report that certain subsides to Boeing have damaged the interests of the EU and Airbus, notably:

  • Research and Development funding granted by NASA to Boeing - US$2.6 billion;

  • Research and Development funding granted by the US Department of Defence to Boeing - up to US$1.2 billion

  • Foreign Sales Corporation export subsidies – US$2.2 billion;

  • Washington State tax breaks to a value of close to US$3.1 billion for the period 2006-24.

The Appellate Body expanded the findings against the US by determining that US$476 million subsidies granted by the City of Wichita (Kansas) are also causing adverse effects.

On 24 September 2012, the EU received the compliance notice from the US in the WTO DS 353 case. The European Union reviewed the measures presented by the US and assessed these as insufficient to comply with WTO rules. As a consequence, the EU held consultations with the US. Unfortunately, these failed to bring about a satisfactory conclusion since the US was unwilling or unable to substantiate its claim of compliance.

Together with today's request for the establishment of a compliance panel, the EU also requests the initiation of a fact-finding procedure under Annex V of the WTO Subsidies Agreement. This is a procedure allowing for information-gathering in disputes where it is claimed that a Member has, through subsidization, caused adverse effects in the form of serious prejudice to the interests of another Member.

Next steps

The European Union has asked for a meeting of the WTO Dispute Settlement Body (DSB) on 23 October 2012 to address this issue. Pursuant to a procedural "sequencing agreement" concluded between the EU and the US, on request of the EU, a compliance panel will be established during that meeting, and the requested initiation of a fact-finding process concerning US subsidies to Boeing and their adverse effects will automatically be initiated.

For further information:

EU's request to establish compliance panel

http://trade.ec.europa.eu/doclib/docs/2012/october/tradoc_149959.pdf

Factsheet on both WTO disputes EU/US large civil aircraft:

http://trade.ec.europa.eu/doclib/docs/2010/september/tradoc_146486.pdf

Contacts :

John Clancy (+32 2 295 37 73)


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