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United States Prevails As WTO Panel Finds EU Subsidies to Airbus Break WTO Rules

September 22, 2016

WTO Compliance Panel Finds EU Failed to Comply with WTO Rules and Continues to Breach WTO Obligations with Massive Subsidies to All Airbus Aircraft 

WTO Report Shows $22 Billion in European Subsidies Caused Tens of Billions of Dollars in Lost American Exports 

Washington, D.C. – Ambassador Michael Froman, the United States Trade Representative, together with Senator Patty Murray, Senator Maria Cantwell, Representative Dave Reichert, Representative Rick Larsen, and Representative Suzan DelBene today announced that the Obama Administration has achieved an important victory in its World Trade Organization (WTO) dispute with the European Union (EU) and four of its member States regarding subsidies to Airbus. In June 2011, the WTO found that the EU conferred more than $18 billion in subsidized financing to Airbus, and that European “launch aid” subsidies had been instrumental in permitting Airbus to launch every model of its large civil aircraft. In December 2011, the EU claimed to have removed the WTO inconsistencies, but the United States disagreed and requested a compliance panel to address the issue.

In the report released today, the compliance panel confirmed that the United States was correct:  the EU did not come into compliance with respect to the subsidies previously found, and it further breached WTO rules by granting more than $4 billion in new subsidized financing for the A350 XWB – causing tens of billions of dollars in adverse effects to the U.S. industry. In total, the panel found that there have been nearly $22 billion in subsidized financing from the EU and Germany, France, the United Kingdom, and Spain, and continuing lost U.S. exports worth tens of billions of dollars.

“This report is a sweeping victory for the United States and its aerospace workers,” Ambassador Michael Froman said. “We have long maintained that EU aircraft subsidies have cost American companies tens of billions of dollars in lost revenue, which this report clearly proves. We will not tolerate our trading partners ignoring the rules at the expense of American workers and their families. Today’s WTO report reinforces the value of international trade rules that ensure U.S. companies and workers can compete and sell their world-class products and services on a level playing field. We expect the EU, Germany, France, the United Kingdom, and Spain – some of our closest trading partners – to respect WTO rules. We call on them to end subsidized financing of Airbus immediately.”

"This ruling is so important to my home state of Washington and to all the American workers who show up every day in this country to build world-class products," Senator Murray said.  "When other countries get away with breaking the rules, it puts our industries-- and so many family-wage jobs up and down the supply chain-- at risk. I'm proud to join the effort to fight back on behalf of our workers and our families, the Washington state economy, and the integrity of our international partnerships."

“This is the largest trade ruling from WTO in history - and they have sided with US manufacturers”, said Senator Cantwell. “The $22 billion in unfair trade subsidies to Airbus from the Europeans are illegal and must stop.   This is a huge victory for Northwest aerospace workers who have been building world-class airplanes for years.  With this decisive ruling, it is now time for the EU to come to the table and settle, rather than waiting for future tariffs.    Without having to compete against illegal, market-distorting practices, Boeing should win more sales around the world.   I’d like to thank President Obama and Ambassador Froman and the USTR personnel for the many years of hard work that brought us to this decision.”  

“Today’s announcement confirms what the U.S. has suspected for some time: that the European Union was unfairly subsidizing Airbus at the expense of American companies and workers – including many in my District,” said Representative Larsen, the ranking member on the House Subcommittee on Aviation. “I will continue to work so that American workers get a fair shot and so that U.S. trading partners who break the rules are held accountable.” 

“We know that American businesses and workers win when competition is fair,” said Representative Reichert. “Today’s confirmation that the EU continues to illegally subsidize aircraft and must be held accountable is not only a huge victory for the United States and the over 260,000 workers employed by the aerospace industry in my home state of Washington, but it is a win for the rule of law and for all those who believe that trade rules are critical to empowering U.S. workers and consumers to compete in the 21st Century economy. Thank you to USTR for its dedication over many years to providing a level playing field for American workers.”

"Washington is home to some of the world's more innovative manufacturers, including Boeing which employs thousands of my constituents," said Representative DelBene. "When I talk to hardworking Americans, they want to ensure other countries are playing by the rules, not playing the system. This ruling is a major win for Washington workers, who deserve equity in a competitive global marketplace."

The compliance panel found that since 2006, subsidies to the Airbus A320 family of aircraft resulted in the displacement or impedance of Boeing 737s in the EU, Australia, China, and India markets, as well as lost sales of 271 737s.

In the twin-aisle market, which includes Boeing’s 767, 777, and 787, the panel found that the subsidies benefitting the A330, A340, and A350 XWB caused displacement or impedance of Boeing aircraft in the EU, China, Korea, and Singapore markets, as well as lost sales of 50 Boeing aircraft. 

When it came to the largest aircraft, the panel found that subsidies benefitting the A380 caused displacement or impedance of Boeing 747s in the EU, Australia, China, Korea, Singapore, and UAE markets, as well as lost sales of 54 Boeing aircraft. 

Additional Background Information

In June 2011, the WTO found that the EU and four of its member States (Germany, France, the UK, and Spain) conferred more than $18 billion in subsidized financing to Airbus and had caused Boeing to lose sales of more than 300 aircraft and to lose market share throughout the world. In fact, in looking at the effect of the EU subsidies, the Appellate Body agreed with the Panel that “[w]ithout the subsidies, Airbus would not have existed… and there would be no Airbus aircraft on the market. None of the sales that the subsidized Airbus made would have occurred.” In contrast, the WTO rejected the EU assertion in the EU’s counter-complaint that U.S. subsidies were responsible for the viability of Boeing’s large civil aircraft production.

The Boeing Company is the only American producer of large civil aircraft and is the largest single U.S. exporter. Boeing is headquartered in Chicago, IL, and has major facilities around the country, including in Washington and South Carolina. The company employs more than 157,000 people and sold $31.8 billion worth of commercial aircraft in 2010. Boeing is the largest American manufacturer of commercial jetliners.

Obama Administration’s Trade Enforcement Record

Today’s result builds on the Obama Administration’s strong record of enforcing the rights of the United States under our trade agreements. Since 2009, USTR has brought 23 enforcement actions at the WTO. The United States has won every one of these disputes decided thus far. This reflects the Administration’s commitment to trade enforcement and indicates the resolve that the United States would bring to enforce the high standards won in the Trans-Pacific Partnership (TPP), ranging from market access for United States agriculture exports, labor and intellectual property rights, protection of the environment, and keeping the internet free and open.

  • Since President Obama was inaugurated in 2009, USTR has filed 23 enforcement complaints (including this one) at the World Trade Organization (WTO) – more than any other WTO Member. The United States has won every single one of those complaints that has been decided by the WTO so far.
  • Obama Administration has brought 14 trade enforcement challenges against China, three against India, and several other complaints against a series of major economies including Indonesia, Argentina, the Philippines, and the European Union. To ensure the greatest economic benefits for American workers and exporters, the Obama Administration has used our trade enforcement actions to emphasize opening these large, strategic markets to which the United States exports a diverse array of products and services.
  • Since 2015, in addition to announcing 5 new WTO challenges, the Obama Administration announced 5 enforcement wins on key matters:
    • In September 2016, the WTO Appellate Body found in favor of the United States in a dispute challenging India’s “localization” rules discriminating against imported solar cells and modules under India’s National Solar Mission.  The appellate report affirmed a February 2016 WTO panel report finding that India’s domestic content requirements discriminate against U.S. solar cells and modules by requiring solar power developers to use Indian-manufactured cells and modules, in breach of international trade rules.
    • In April 2016, China signed a Memorandum of Understanding with the United States in which China agreed to take specific actions that would remove all the WTO-inconsistent elements of its “Demonstration Bases-Common Service Platform” export subsidy program.  Those prohibited export subsidies were being given to manufacturers and producers across seven economic sectors and dozens of sub-sectors located in more than one hundred and fifty industrial clusters throughout China, thereby creating unfair competition for American workers and businesses.
    • In July 2015, the United States prevailed in a WTO challenge to China’s compliance actions following WTO findings in 2012 that China’s duties on high-tech steel were inconsistent with WTO rules.  Those WTO-inconsistent duties contributed to over $250 million in annual export losses for American steel exporters.  The U.S. compliance challenge was the first time any WTO Member had initiated a WTO proceeding to challenge a claim by China that it had complied with adverse WTO findings.
    • In June 2015, the WTO found in favor of the United States in a dispute challenging India’s ban on various U.S. agricultural products – such as poultry meat, eggs, and live pigs – allegedly to protect against avian influenza.  The WTO agreed with the United States that India’s ban breached numerous international trade rules, including because it was imposed without sufficient scientific evidence and was not based on international standards, which confirm that importing U.S. products is safe.
    • In January 2015, the WTO found that Argentina’s import licensing requirements and other import restrictions breach international trade rules.  These restrictions potentially affect billions of dollars in U.S. exports each year, including exports of energy products, electronics and machinery, aerospace equipment, pharmaceuticals, precision instruments, medical devices, motor vehicle parts, and agricultural products.

Enforcement extends far beyond formal disputes. The Obama Administration has opened markets for American workers, farmers, and businesses by taking tough stands to resolve unwarranted trade barriers with trading partners. For example, we have eliminated BSE-related restrictions in 16 countries since January 2015, gaining additional market access for U.S. beef in Brazil, Colombia, Costa Rica, Egypt, Guatemala, Iraq, Lebanon, Macau, New Zealand, Peru, Philippines, Saint Lucia, Singapore, South Africa, Ukraine, and Vietnam. As a result, U.S. beef exports have recovered to pre-2003 levels. We also successfully engaged with the Philippines – including through the Special 301 process – to enhance protection of intellectual property rights. These and similar actions have helped expand exports and level the playing field for American goods and services.