Requests Authorization To Impose Countermeasures Against EU's Claims

U.S. Trade Representative Ron Kirk announced Friday that the United States is requesting that the European Union (EU) enter into consultations regarding the notification it made on December 1, 2011, claiming to have fully complied with the World Trade Organization (WTO) ruling that subsidization of Airbus aircraft is contrary to WTO rules. The United States has reviewed carefully the limited information in that notification. It appears to show that the EU has not withdrawn the subsidies in question and has, in fact, granted new subsidies to Airbus’ development and production of large civil aircraft.

The United States is also requesting authorization from the WTO Dispute Settlement Body (DSB) in Geneva to impose countermeasures annually in response to the EU’s claim that it fully complied with the ruling in this case. The amount of the countermeasures would vary annually, but in a recent period would have been in the range of $7-10 billion. This step will preserve U.S. rights, but any actual imposition of countermeasures would not occur until after further WTO proceedings.

“The WTO clearly found that every single grant of launch aid to Airbus, for every single aircraft that company produced, was a WTO-inconsistent subsidy that caused unfair adverse effects to U.S. industry and jobs,” said Ambassador Kirk (pictured). “Our action today underscores what we have said all along – that the United States cannot accept anything less than an end to this subsidized financing. The United States remains prepared to engage in any meaningful efforts, through formal consultations and otherwise, that will lead to the goal of ending subsidized financing at the earliest possible date.”

The United States initiated this WTO dispute in October 2004 to end decades of launch aid and other subsidies provided to Airbus. The DSB ultimately found that European government launch aid had been used to support the creation of every model of large civil aircraft produced by Airbus. The DSB also found that launch aid and the other challenged subsidies to Airbus have significantly distorted the global market for large civil aircraft, and that those subsidies have directly resulted in Boeing losing sales and market share, in particular that launch aid and other challenged subsidies to Airbus have directly resulted in Boeing losing sales involving purchases of Airbus aircraft by easyJet, Air Berlin, Czech Airlines, Air Asia, Iberia, South African Airways, Thai Airways International, Singapore Airlines, Emirates Airlines, and Qantas – and lost market share, with Airbus gaining market share in the European Union and in third country markets, including China and Korea at the expense of Boeing.

The DSB recommended that the EU and the EU member States that financially support Airbus take appropriate steps to withdraw the subsidies or remove the adverse effects within six months. That period ended on December 1, 2011. Under WTO rules, the United States has the option of challenging the EU’s claims to have withdrawn any subsidies or eliminated their adverse effects, which is the step being taken in Geneva today.

In a statement, Boeing said it was disappointed in the failure of EADS/Airbus and European governments to comply with the WTO's ruling.

"Boeing strongly supports all the efforts by the U.S. Trade Representative to seek full compliance with the removal of all the illegal government subsidies to Airbus -- particularly market-distorting launch aid, the most pernicious form of subsidy Airbus was found to have received," the company said. "There can be no compliance with the WTO's ruling that ignores any non-commercial launch aid that Airbus is currently receiving for the A350. Despite the very clear WTO ruling, EADS/Airbus and European governments have failed to remove outstanding subsidies. This illegal subsidization of Airbus products - plane after plane – is unsustainable and must stop now."

FMI: www.ustr.gov, www.boeing.com