In a verdict published on Monday 28 November, the special WTO panel in charge of the arbitration involving the EU appeal against Washington state subsidies to the US aircraft manufacturer, Boeing, for building the large 777X (DS 487) aircraft, judged that one of the conditional tax incentive programmes targeted by the complaint is unlawful and fails to comply with WTO rules.
The verdict highlights the fact that, “The Panel has found that the European Union has demonstrated that the B&O aerospace tax rate for the manufacturing or sale of commercial airplanes under the 777X programme, pursuant to ESSB 5952, is a subsidy contingent upon the use of domestic over imported goods, prohibited under Articles 3.1(b) and 3.2 of the SCM agreement (Agreement on Subsidies and Countervailing Measures)". It also gives the US 90 days to comply with this decision.
On the other hand, the special group rejected the EU complaint against six other Washington state tax incentive measures to help Boeing develop the 777X.
On behalf of the EU, the European Commission immediately welcomed this “major victory” in its dispute with the US at the WTO on the question of support for their respective aircraft manufacturers, Airbus and Boeing.
In a press release, the Commission explained that the massive US support for Boeing 777X production infringes world trade rules and, according to the special panel report, “The WTO confirmed that the US 2013 decision to extend tax breaks for Boeing until the year 2040 goes against previous WTO rulings. By making these tax breaks depend on the use of domestically produced wings, the US also discriminated against foreign suppliers”.
This is the first time in history of the Airbus/Boeing dispute that a special WTO panel has pointed out that one of the parties in the dispute has granted subsidies that discriminate against foreign manufacturers and which are completely prohibited.
The Commissioner for Trade, Cecilia Malmström, stated that this decision is an important victory for the EU and its aeronautics industry, “The panel has found that the additional massive subsidies of US$ 5.7 billion provided by Washington State to Boeing are strictly illegal. We expect the US to respect the rules, uphold fair competition, and withdraw these subsidies without any delay".
Boeing also claimed victory and claimed that the EU complaint had been rejected in six out of the seven Washington state tax incentive programmes targeted and in a large part of the seventh programme.
In a press release, Boeing asserted, “In total, the EU claimed that Boeing had received $8.7 billion in subsidies. This claim was rejected by the WTO, which found future incentives totaling no more than $50 million a year to be impermissible. The WTO found that to date Boeing has received no benefit from the 777X rate incentive, and will not until 2020”. It also said that the US would “probably” appeal against the decision by the WTO panel.
The European Airbus manufacturer considers that Washington state tax incentives for the Boeing 777X have cost it $50 billion in sales.
In spring 2017, the WTO is expected to publish its report on US compliance with the WTO verdict involving the EU complaint against Boeing aid (DS 353).
This case comes on top of other Airbus/Boeing cases of 2004. In this context, the EU is waiting for the WTO publication in Spring 2017 of its report on US compliance with the WTO verdict on the EU complaint against aid to Boeing (DS 353). In the middle of last October, the EU also appealed against WTO conclusions on EU compliance with the WTO verdict on the US complaint against EU support for Airbus (DS 316) - (see EUROPE 11645). (Original version in French by Emmanuel Hagry)