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United States Prevails in WTO Dispute over Large Civil Aircraft

Washington, D.C. – Today, United States Trade Representative Ron Kirk announced that a World Trade Organization (WTO) dispute settlement panel found in favor of the United States on most of the claims in the dispute brought by the European Union concerning alleged subsidies to the production of Boeing airliners.

Last year, a different panel found that the Europeans gave Airbus launch aid and other WTO-inconsistent subsidies in the amount of approximately $20 billion. Although today’s panel agreed with the EU in some areas, the programs it asked the United States to remove were worth only $2.7 billion.

“Today a WTO panel confirmed what we have been saying for the last 20 years – that the WTO-inconsistent subsidies that the Europeans gave to Airbus dwarf anything that the U.S. government has given to Boeing. This outcome shows that the steps the federal government and the states have taken to create a positive environment for our workers and industries are generally consistent with WTO rules,” said Ambassador Kirk. “This is an important victory for the United States, and particularly for American workers and businesses. It demonstrates the Obama Administration’s dedication to using WTO dispute settlement to ensure a level playing field for American workers and businesses.”

Although the panel last year found that Airbus received prohibited export subsidies from Germany, Spain, and the United Kingdom, today’s report rejected the EU claim that Washington state gave prohibited subsidies to Boeing.

Click here to view Ambassador Kirk’s statement.

BACKGROUND

The Boeing Company, the only U.S. producer of large civil aircraft – generally those with 100 or more seats – is the largest single U.S. exporter. Boeing is headquartered in Chicago, IL, and has major facilities around the country. The company employs more than 157,000 people, and had revenue of $34 billion from the sale of commercial aircraft in 2009. Boeing is the largest manufacturer of commercial jetliners and military aircraft, with additional capabilities in helicopters, electronic and defense systems, missiles, satellites and advanced information and communications systems.

The EU commenced these dispute settlement proceedings on October 6, 2004, the same day that the United States commenced proceedings against EU subsidies. The EU alleged that research programs operated by NASA, the Department of Defense, and the Department of Commerce granted subsidies to Boeing that were contrary to WTO rules. The EU also challenged tax measures by the federal government and the states of Washington, Kansas, and Illinois, the construction of infrastructure in Washington, and a Department of Labor grant to a community college in Washington. The EU asserted that the total value of these programs for the 1989-2006 period was $19 billion.

A subsidy is inconsistent with WTO rules if it is specific to a certain industry or industries and causes adverse effects to the interests of another WTO Member. The Panel made the following findings in response to the EU claims:

Findings against the EU:

  • Most of the NASA research spending challenged by the EU did not go to Boeing.

  • Most of the Department of Defense research payments to Boeing were not subsidies or did not cause adverse effects to Airbus.

  • Treatment of patent rights under U.S. government contracts is not a subsidy specific to the aircraft industry.

  • Treatment of certain overhead expenses in U.S. government contracts is not a subsidy.

  • Washington state infrastructure and plant location incentives were not a subsidy or did not cause adverse effects.

  • U.S. Department of Commerce research programs were not a subsidy specific to the aircraft industry.

  • The U.S. Department of Labor payments to Edmonds Community College in Snohomish County, Washington, were not specific subsidies.

  • Kansas and Illinois tax programs were not subsidies or did not cause adverse effects.

  • The Foreign Sales Corporation/Extraterritorial Income tax measures were a WTO-inconsistent subsidy, but as the United States removed the subsidy in 2006, there was no need for any further recommendation.

Findings against the United States:

  • NASA research programs conferred a subsidy to Boeing of $2.6 billion that caused adverse effects to Airbus.

  • Tax programs and other incentives offered by the state of Washington and some of its municipalities conferred a subsidy of $16 million that caused adverse effects to Airbus.

  • Certain types of research projects funded under the Department of Defense’s Manufacturing Technology and Dual Use Science and Technology programs were a subsidy to Boeing of approximately $112 million that caused adverse effects to Airbus.

Both sides have the right to appeal the panel’s findings to the WTO Appellate Body within 30 days.