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EU Challenges Boeing Subsidy Claims

by Mike Godfrey, Tax-News.com, Washington

01 October 2012


The seemingly unending trade dispute between the European Union (EU) and the United States over aircraft manufacturer subsidies looks set to roll on after the European Commission (EC) confirmed that it will challenge claims by the US that illegal subsidies granted to Boeing have been fully removed.

On September 23, the Office of the US Trade Representative (USTR) claimed in a compliance notice that all state support measures which had been found to be illegal had been fully revoked.

"USTR has been working extensively over the last six months with all of the government entities affected by the March 23, 2012 ruling in this case – including NASA, the Department of Defense, the State of Washington, and the City of Wichita – to ensure full compliance with the United States’s WTO obligations," the trade department stated in a memo.

In the EU’s case against the US, the World Trade Organization (WTO) found that USD3-4bn in subsidies had been given to Boeing, which the US claims was mostly in the form of funding for public research.

However, after a "quick review" of the US measures by the EC, Brussels suggests that the US "has neither withdrawn the illegal subsidies granted to Boeing, nor removed their adverse effects".

"The EU even has indications that the US could have actually granted more illegal subsidies to Boeing in the meantime," the Commission alleges. "As a consequence, the EU feels obliged to challenge US non-compliance in the WTO Boeing ruling."

Under a procedural "sequencing agreement" concluded between the EU and the US, the parties have 15 days to enter into consultations to resolve any disagreement. Thereafter, the EU has the right to establish a panel to review the issue of US compliance.

"We had expected that the US would have finally complied in good faith with its international commitments and would have abided by the WTO rulings that clearly condemned US subsidies to Boeing" said EU Trade Commissioner Karel De Gucht. "We are disappointed that this does not seem to be the case. So, the US leaves us with no other choice but to insist on proper compliance before the World Trade Organization. We are confident that this process will finally lead to a level playing field in the aircraft sector."

While Boeing said that it "fully supports" the actions taken by the US government to address the "relatively small amounts of subsidy", it accused the EU of being by far the worst offender in the subsidies war.

"The United States has now complied with the WTO ruling. Unfortunately, the same cannot be said of Airbus and its government sponsors, which have thumbed their noses at the WTO," the company stated. "Despite a crystal clear ruling against launch aid subsidies, European governments have continued the practice by providing Airbus with billions of taxpayer euros and pounds for its next new product, the A350. What is more, the European governments have yet to remove the very substantial subsidies, including those propping up the A380, which the WTO's ruling in June of last year requires them to do."

The US claims that the EU has provided more than USD18bn in subsidies to Airbus, and a WTO panel is currently hearing a case against the EU for its lack of compliance with the June 1, 2011 ruling.

TAGS: compliance | business | European Commission | law | aviation | World Trade Organisation (WTO) | United States | Europe

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