In Major Win for the United States, WTO Compliance Panel Rejects 28 of 29 EU Claims
Washington, D.C. – The World Trade Organization (WTO) today issued a compliance panel report rejecting almost all claims by the European Union (EU) that U.S. subsidies to Boeing harmed Airbus’s ability to sell large civil aircraft. The EU challenged 29 U.S. state and federal programs that allegedly conferred $10.4 billion over six years in subsidies to Boeing, but the panel found that 28 of the 29 programs were consistent with WTO rules.
The panel found only one state-level program, which had an average value of $100-110 million in the 2013-2015 period, to be contrary to WTO rules. The United States disagrees and plans to appeal this limited finding.
The findings today are in sharp contrast to another panel’s report last year in the United States’ dispute concerning the EU’s “launch aid” and other subsidies to Airbus. In September of 2016, that WTO panel found that the EU failed to remove existing WTO-inconsistent subsidies and had further breached WTO rules by giving Airbus billions of dollars in additional subsidies, which continue to cause tens of billions of dollars in harm to Boeing.
“For years, European governments have tried to justify their massive subsidization of Airbus by falsely claiming a need to offset U.S. subsidies to Boeing,” said U.S. Trade Representative Robert Lighthizer. “The WTO report confirms what we have always said: the United States does not provide subsidies even remotely comparable to the uniquely large and uniquely harmful EU subsidies to Airbus. It is time for the EU to stop making excuses and instead to join us in negotiating a settlement to remove all WTO-inconsistent subsidies so that our world-class aircraft manufacturers can compete on a level playing field.”
Under WTO rules, the panel report will be adopted if either party so requests within 60 days of the report’s circulation, or either party may appeal the report before it is adopted.
After many years of seeking unsuccessfully to convince the EU and four of its member States (France, Germany, Spain, and the United Kingdom) to cease its subsidization of Airbus, in 2004 the United States brought a WTO challenge to EU subsidies. The EU responded by challenging what it claimed were even larger subsidies to Boeing by the United States.
Two separate WTO panels addressed the claims brought by the United States and the EU, respectively. The two processes resulted in two very different sets of WTO findings and subsequent respondent actions.
The United States’ Claims Against the EU
In 2011, the WTO found that the EU provided Airbus $17 billion in subsidized financing from 1968 to 2006, and that European “launch aid” subsidies breached WTO rules because they were instrumental in permitting Airbus to launch every model of its large civil aircraft, causing Boeing to lose sales of more than 300 aircraft and to lose market share throughout the world.
In response, the EU removed two minor subsidies, but left most of them unchanged. The EU also granted Airbus more than $5 billion in new subsidized “launch aid” financing for the A350 XWB.
The United States filed a complaint in March 2012 alleging that the EU not only had failed to comply with the WTO’s findings but had further breached WTO rules through the new subsidized financing for the A350 XWB.
The WTO established a compliance panel to evaluate that question, leading to findings issued in September 2016 that the EU had not taken any affirmative steps to withdraw its earlier subsidies and had granted new subsidies that caused tens of billions of dollars of adverse effects to Boeing, bringing the total of subsidized financing of Airbus to $22 billion. The EU appealed that compliance panel report; the matter is still pending before the WTO Appellate Body.
The EU’s Claims Against the United States
The report issued today has its origins in the EU’s original 2004 case alleging the U.S. provided unlawful subsidies to Boeing. In that case, the WTO found that the United States provided Boeing with $3.2-4.3 billion in subsidized research and development funding and income tax benefits, with far more limited market effects than the EU’s subsidies to Airbus.
In response to the WTO’s findings, the United States modified the research and development funding and revoked the income tax benefit to remove any adverse effects to the EU. The EU then filed a complaint in October 2012 alleging that the United States failed to comply with the findings against it. The WTO established a compliance panel to evaluate that question, resulting in the report issued today which rejects 28 of 29 EU claims.