Says Failure To Address Boeing Subsidies 'Condemned' In The March 2012 Final WTO Judgment Triggers Request For Largest Sanction In WTO History

The EU on Thursday filed a request for the WTO to grant $12 billion in annual sanctions following what it says is Boeing’s failure to address the clear verdict it suffered in the WTO’s March 2012 final judgment. It is the largest WTO penalty ever requested, and it follows what the EU says is the worst loss a party has seen in the history of the WTO. Boeing, of course, views the ruling differently.

According to the EU, Boeing, in March 2012, had been given a six months reprieve to implement the judgment. Their interpretation of the WTO ruling was that the body had condemned state, local and federal aid Boeing received in support of every one of Boeing’s current commercial aircraft programs. In a filing with the WTO, the EU says  it became clear that Boeing has failed to implement the judgment. With that failure, the case moves to its next phase: sanctions following confirmation that Boeing continues to distort the marketplace with taxpayer-funded subsidies.  
 
“Airbus is grateful to the EU Commission for taking consequential action,” said Airbus spokesperson Maggie Bergsma, “However, this is nothing but the next step in a trade conflict that was launched in 2004 by Boeing. Boeing has been denying the decades of government support for years but was finally faced with a sweeping judgment in March. We regret that Boeing continues a legal battle that should have long been resolved by a mutual agreement. We made offers time and again but are ready to fight it through if the other side wishes to do so.”
 
According to the EU, the WTO final verdict had called in March for: 

• Withdrawal of “at least $5.3 billion” of federal subsidies already received by Boeing.
• Elimination of an additional $2 billion in illegal state and local subsidies due in the future under existing illegal schemes.
• Termination of all U.S. Department of Defense (DOD) and NASA research grants to Boeing, including funding, Boeing use of government facilities and the illegal transfer of IP rights to Boeing.

The EU says its requested penalty is justified by the WTO panel confirmation that the effect of the subsidies is significantly larger than their face value in light of their “particularly pervasive” nature. For example, according to the WTO, Boeing would not have been able to launch the 787 without illegal subsidies. Today’s request belies Boeing’s argument that the WTO’s findings will have no relevant consequences for Boeing.

The Office of the United States Trade Representative (USTR) sent notifications to the World Trade Organization (WTO) Dispute Settlement Body earlier this week detailing what it said was the United States’ timely compliance with the WTO’s recommendations in the large civil aircraft dispute with the European Union (EU) related to U.S. government subsidies to Boeing. The United States’ deadline to comply with the rulings and recommendations in this case was September 23, 2012. The USTR said that the EU has not complied with the WTO ruling released in June of 2011. Boeing said in a statement that "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."

In response to the USTR, the EU said in a news release that the lack of information in the US notification unfortunately facilitated a quick review which 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 EU Trade Office said the EU feels obliged to challenge U.S. non-compliance in the WTO Boeing ruling. To that end, the EU is requesting that the United States enter into consultation regarding the notification it made on September 24, 2012.
 
"We had expected that the U.S. would have finally complied in good faith with its international commitments and would have abided by the WTO rulings that clearly condemned U.S. subsidies to Boeing" said EU Trade Commissioner Karel De Gucht. "We are disappointed that this does not seem to be the case. So, the U.S. 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."

FMI: www.wto.org