EU Rejects U.S. Notice of Compliance with WTO Ruling

 - October 1, 2012, 12:10 PM
EU Trade Commissioner Karel De Gucht (Photo: European Union)

Governments on opposite sides of the Atlantic remain at loggerheads over subsidies to their respective aerospace industries following a European Union rebuke last week of a U.S. claim that it has met a World Trade Organization deadline to withdraw illegal support to Boeing.

A compliance notice issued by the U.S. Trade Representative’s office on September 24 reported that NASA has ended various technology programs and cut funding for aeronautics research contracts with private parties and removed limitations on access to results of its R&D efforts, including ending the use of limited exclusive data rights (LERD) clauses. The notice also said the U.S. has shut off funding to six separate DoD programs and enacted legislation that ends Foreign Sales Corporation and Extraterritorial Income (FCS/ETI) tax benefits. Finally, it claims that Washington state’s tax rates for aerospace manufacturing and retailing now comply with WTO rules, as does Wichita’s Industrial Revenue Bond Program, from which, according to the Trade Representative’s office, Boeing hasn’t benefited since 2007.

For its part, the EU concluded that a lack of information in the two-page notification suggests that the U.S. hasn’t withdrawn the illegal subsidies and cited “indications” that the U.S. has granted more subsidies to Boeing since the WTO’s March 23 ruling. On Thursday, the EU asked the WTO to level sanctions of $12 billion a year, noting that the “particularly pervasive” nature of the U.S. subsidies produced benefits significantly larger than their face value. For example, according to the WTO, Boeing’s launch of the 787 depended on illegal subsidies.

“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 in a statement. “We are disappointed that this does not seem to be the case.”

Meanwhile, according to Boeing, Airbus and the European governments in whose jurisdictions it operates “have thumbed their noses” at the WTO.

“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,” said Boeing in a statement. “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 WTO found that European governments had provided to Airbus $18 billion in subsidies, though not all of it illegal.