U.S. Says It Prevailed, Despite WTO Ruling Against $5.3B in Boeing Subsidies

Both the U.S. Trade Representative and EU issued responses to the ruling stating their side had prevailed. Press reports indicate that the EU has already filed its appeal, and that a U.S. appeal would soon follow.

USTR Says U.S. Only Told to Remove $2.7B in Subsidies

According to USTR, the panel only recommended that the U.S. withdraw the following programs and tax measures worth $2.7 billion:

• NASA research programs conferred a subsidy to Boeing of $2.6 billion that caused adverse effects to Airbus.
• Tax programs and other incentives offered by the state of Washington and some of its municipalities conferred a subsidy of $16 million that caused adverse effects to Airbus.
• Certain types of research projects funded under the Department of Defense’s (DOD’s) Manufacturing Technology and Dual Use Science and Technology programs were a subsidy to Boeing of approximately $112 million that caused adverse effects to Airbus.

Panel Found Several U.S. Programs Were Not Subsidies

According to USTR, the panel ruled against several EU claims and found that:

• Certain of the NASA research spending challenged by the EU did not go to Boeing.

• Certain of the DOD’s research payments to Boeing were not subsidies or did not cause adverse effects to Airbus.
• Treatment of patent rights under U.S. government contracts is not a subsidy specific to the aircraft industry.
• Treatment of certain overhead expenses in U.S. government contracts is not a subsidy.
• Washington state infrastructure and plant location incentives were not a subsidy or did not cause adverse effects.
• U.S. Department of Commerce research programs were not a subsidy specific to the aircraft industry.
• The U.S. Department of Labor payments to Edmonds Community College in Snohomish County, Washington, were not specific subsidies.
• Kansas and Illinois tax programs were not subsidies or did not cause adverse effects.
• The Foreign Sales Corporation/Extraterritorial Income tax measures were a WTO-inconsistent subsidy, but as the United States removed the subsidy in 2006, there was no need for any further recommendation.

(See panel ruling for complete details of these rulings, along with others in which the panel did not rule but exercised "judicial economy.")

USTR Says U.S. Prohibited Subsidies Dwarfed by EU’s $20B

In its response to the ruling, USTR Kirk stated that even though the panel agreed with the EU in some areas, the U.S. prevailed. This is because the nearly $20 billion² a related panel found in inconsistent EU subsidies to Airbus dwarfs the $2.7 billion the U.S. was told to withdraw for Boeing.

EU Says It Won All Major Claims, Defends Its Own Subsidies as “WTO Compatible in Principle”

The European Union also issued a response, stating that the EU had won on all of its main claims. In addition, the EU stated that support to Boeing has been and continues to be in the form of non-repayable grants or free access to government facilities, as opposed to that in the Airbus case where the most important instrument, Repayable Launch Investment (RLI), was considered to be WTO-compatible in principle, with the subsidy element being, for certain cases, solely the difference in conditions provided in comparison to other repayable commercial financing.

Either Side Can Appeal Panel Finding Within 30 Days

Both sides have the right to appeal the panel’s findings to the WTO Appellate Body within 30 days. (The U.S. and EU have both appealed aspects of the other panel finding on Airbus. See ITT’s Online Archives or 11/19/10 and 07/21/10 news, 10111938 and 10072131, for BP summaries.)

¹The WTO agreement on subsidies and countervailing measures only cover subsidies that are found to be “specific” (i.e., available only to an enterprise, industry, or group of industries).

It also defines two categories of subsidies:

(i) Prohibited - those that require recipients to meet certain export targets or to use domestic goods instead of imported goods and must be withdrawn immediately;

(ii) Actionable - those the complaining country shows have an adverse effect on its interests and must be withdrawn or its adverse effects removed.

²A February 2011 press release by Boeing stated that the $20B in EU subsidies included $15B in launch aid, $2.2B in equity infusions, $1.7B in infrastructure, and $1.5B in research and development. However, the EC states in its press release (below) that unlike the current panel report, the Airbus report did not quantify the amount of WTO-incompatible subsidies granted to it. (See ITT’s Online Archives or 02/01/11 news, 11020139, for BP summary of Boeing’s statement.)

(See ITT’s Online Archives or 07/01/10 news, 10070124, for BP summary of the WTO panel report in the related dispute regarding U.S. allegations of EU subsidies provided to Airbus.)

WTO history of “U.S.-Measures Affecting Trade in Large Civil Aircraft (Second Complaint)” (DS353) available here.

USTR press releases, dated 03/31/11, available here and here

EU press release, dated 03/31/11, available here