WTO requests final fix in EU-US aircraft subsidy war

A Boeing 737-800 Next Generation (NG) aircraft is pictured on the website of Dobrolyot [Photo: Dobrolyot]

A Boeing 737-800 Next Generation (NG) aircraft. [Photo: Dobrolyot]

The World Trade Organisation (WTO) released a final ruling on Thursday (28 March) saying the US and Boeing have complied with all but one subsidy complaint in a dispute with Europe over aircraft subsidies.

The ongoing WTO case has seen tit-for-tat exchanges between the US and Europe in the last 15 years over subsidies to their respective aircraft manufacturers, Boeing and Airbus.

The latest report from the WTO on the matter stated that the US has only one measure to fix – the Washington State business and occupancy (B&O) tax rate – before coming into full compliance with global trade rules.

The WTO’s decision follows a 2012 ruling which found that Boeing received at least $5 billion in subsidies prohibited under international trade rules.

“The Appellate Body has now settled this case definitively, confirming our view the US has continued to subsidise Boeing despite WTO rulings to the contrary,” said Commissioner for Trade Cecilia Malmström.

“European companies must be able to compete on fair and equal terms and today’s ruling is important in this respect,” she added.

Across the Atlantic, reactions were markedly different. “This report confirms what every other WTO report on these issues has found: the United States does not provide support even remotely comparable to the exceptionally large and harmful EU subsidies to Airbus,” said US Trade Representative Robert Lighthizer.

“It is long past time for the EU to stop their subsidies and let our world-class aircraft manufacturers compete on a truly level playing field,” he added.

Both governments have stated they have grounds for sanctions because of their respective WTO reports.

All sides claim victory in WTO Airbus ruling

Trade judges on Wednesday (18 May) partially overturned a ruling that had accused EU states of giving Airbus illegal subsidies, but said the aircraft maker did receive billions of dollars of unfair aid that harmed Boeing.

In a statement, Airbus said the final ruling was an opportunity to leave the dispute behind.

“We hope that these findings will prompt the United States and Boeing to move forward constructively in this long-standing dispute and join us in working towards a fair-trade environment,” said John Harrison, general counsel at Airbus.

The US aircraft manufacturer issued its own statement saying that “Boeing will support the United States and Washington State as they take steps necessary to fully comply with today’s ruling.”

A long history of disputes

The EU-US dispute finds its roots in a 1992 bilateral trade agreement that was meant to level the playing field between the two sides on aircraft subsidies. But the agreement was allegedly broken by both parties.

In 2004, the US filed a complaint to the WTO saying the EU provided illegal subsidies to Airbus. The European Commission retorted with its own complaint about subsidies to Boeing.

Since then, the two sides have filed complaints to the WTO twice.

The EU provides repayable launch investments to its companies which are repaid with interest over a period of years. While the US has a multitude of subsidies at various levels of government. 

In its rulings, the WTO ordered the EU to address the adverse effects of its subsidies or withdraw them. The US claimed that Airbus benefitted from $17 billion between 1989 and 2006.

US to press WTO to enforce ruling on Airbus subsidies

The Obama administration said Monday (3 October) that it will press the World Trade Organisation to enforce a panel report that found the European Union guilty of maintaining illegal subsidies to Airbus.

The EU has made significant changes to its funding mechanisms since the original claims were made. 94% of the complaints made by the US have been rejected by the WTO since May 2018, the European Commission pointed out.

The US has made similar progress and the report today declared that they have complied with all but one resulting in 98% of complaints fixed with only one left.

Between 1989 and 2006 Boeing benefited from NASA, US Department of Defence and Washington State/Kansas subsidies totalling over $5 billion, the EU says.

[Edited by Frédéric Simon]

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