Late last month, the World Trade Organisation’s (WTO’s) Appellate Body found that the US had failed to end some of the subsidies awarded by federal, State and local authorities to aerospace giant Boeing, and to stop the damage these subsidies were causing to Boeing’s Europe-based arch rival, Airbus. These subsidies apply to Boeing’s commercial aircraft business.
“This is a clear victory for the EU (European Union) and Airbus,” affirmed Airbus general counsel John Harrison. “It vindicates our position that Boeing, while pointing fingers at Airbus, has not taken any action to comply with its WTO obligations, contrary to Airbus and the EU.”
In the report containing its findings, the Appellate Body – the WTO’s highest court – rejected all the arguments put forward by the US. It classified a number of US federal and State initiatives as illegal subsidies or even (as, for example, the Foreign Sales Corporation programme) as prohibited subsidies.
“With this damaging report, continuing to deny they receive massive illegal subsidies from the US government is no longer an option,” asserted Harrison. “Stated differently, absent settlement, the US will pay – in perpetuity – billions in annual sanctions driven by every single flying Boeing programme, while the EU would face, in the worst case, only minor issues.”
The Appellate Body’s report also stated that, although the US had brought many of its subsidies into line with WTO rules, the US and Boeing still had to carry out further compliance measures. Should they not do so, the EU could seek to impose countermeasures on its imports of US products.
“We hope that these findings will prompt the US and Boeing to move forward constructively in this long-standing dispute and join us in working towards a fair-trade environment,” he said. “In the absence of a constructive approach, the EU now has a very strong legal case to move forward to countermeasures.”
“The ruling is a welcome one for the EU, its aircraft-producing industry and workers across EU member states in this strategic sector,” highlighted EU Trade Commissioner Cecilia Malmström. “The Appellate Body has now settled this case definitively, confirming our view that the US has continued to subsidise Boeing despite WTO rulings to the contrary. We will continue to defend a level playing field for our industry. European companies must be able to compete on fair and equal terms and today’s (March 28) ruling is important in this respect.”
The dispute between Airbus and Boeing about subsidies for the development of their respective commercial aircraft designs started in the WTO in 2006. Over the years, there have been a number of WTO rulings on different US and EU support programmes, some of which have been in Boeing’s favour, and some in Airbus’s. This ruling is the final one in the long-running dispute. The EU considers it a “final victory”. Both Airbus and the EU welcomed the outcome.
“The EU, member states and Airbus have always publicly and vocally favoured resolution of the conflict through negotiation rather than litigation,” stated Airbus in its analysis of the dispute. “Whatever happens, Europe and the US will almost certainly be compelled to negotiate a new civil aircraft agreement of some description eventually
,” the company said.