In Major Win for the United States, WTO Appellate Report Agrees with Compliance Panel That Finds Only One WTO-Inconsistent State Subsidy
Washington, DC – The World Trade Organization (WTO) today released an appellate report rejecting arguments by the European Union (EU) that the U.S. federal and state programs gave more than $10 billion in subsidies to Boeing large civil aircraft.
In 2017, a WTO compliance panel rejected EU arguments that 29 state and federal programs allegedly conferred $10.4 billion in subsidies to Boeing over six years. The panel found only one program, a Washington state tax measure worth an average annual value of approximately $100 million from 2013-2015, to be WTO-inconsistent. The EU filed an appeal arguing that the panel should have found against the United States on more of the EU claims. The compliance appellate report today confirms that the only WTO-inconsistent program is that Washington state tax measure.
These findings stand in sharp contrast to the compliance appellate report issued last year in the U.S. challenge to EU subsidies to Airbus, which found the EU continued acting contrary to WTO rules in providing $9 billion in subsidized financing for Airbus to launch its two largest aircraft, the A380 and A350 XWB. A WTO arbitrator is currently evaluating the U.S request to impose approximately $11 billion in annual countermeasures in response to the damaging trade effects of the EU subsidies.
“For years, European governments have provided massive subsidies to Airbus that dwarf any U.S. subsidies to Boeing,” said U.S. Trade Representative Robert Lighthizer. “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. 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.”
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 their 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 U.S. 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 an appellate report issued in May 2017 finding that EU subsidies to high-value, twin-aisle aircraft have caused serious prejudice to U.S. interests. The report found that billions of dollars in launch aid to the A350 XWB is causing significant lost sales of Boeing 787 aircraft. The report found that subsidies to the A380 continue to cause significant lost sales of Boeing 747 aircraft, as well as impedance of exports of Boeing very large aircraft to the EU, Australia, China, Korea, Singapore, and UAE markets.
Based on the appellate report, the United States requested authority to impose countermeasures worth $11.2 billion per year, commensurate with the adverse effects caused by EU subsidies. The EU challenged that estimate, and a WTO arbitrator is currently evaluating those claims.
The EU 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 in June 2017, which rejected 28 of 29 EU claims. Today’s appellate report confirms that finding.