The EU has made clear that it disagrees with the reversal by the WTO Appellate Body on Monday 4 September of the decision of WTO dispute settlement panel on the complaint lodged by the EU against subsidies from Washington State to American aircraft manufacturer Boeing for the construction 777X jumbo jet (DS 487). The EU has, however, expressed optimism on the next phase of the process in its dispute at the WTO with the United States over support for the aeronautical industry.
On Monday, the WTO Appellate Body reversed the previous WTO panel ruling of 28 November 2016 that the range of outcome-based tax incentives offered by Washington State to Boeing for the development and production of its 777X aircraft were “prohibited” under the terms of the WTO agreement on subsidies and compensatory measures.
In its complaint, the EU argued that the Washington State subsidy to Boeing to locate its 777X development programme there, which included the siting in Washington of the wing assembly for the same airplane programme, was “a prohibited local content subsidy … considered the most trade distortive category of subsidies, as they depend on the use of domestically produced goods”, the Commission pointed out in a press release.
“While the Appellate Body has not confirmed the prohibited nature of the tax subsidies to Boeing for the 777X, Washington State tax breaks are still ‘actionable’ subsidies, i.e. subsidies that violate WTO rules causing economic harm to the producer of another WTO member. This ruling does not affect the obligation of the United States to put an end to the actionable tax subsidies”, it goes on.
Tax support by Washington State to Boeing, extended in 2013 until year 2040, “totals several billion dollars”, and was already found to be WTO “incompatible” in a previous WTO panel report (DS 353) in 2012 as it results in “extensive economic damage” to the aircraft sales of European company Airbus, the Commission says.
The obligation on the US to withdraw the tax support was also confirmed by the WTO compliance panel in this case in its ruling in June 2017 (see EUROPE 11805), it adds, expressing confidence that the ruling by the Appellate Body on the United States’ continuing failure to comply with the WTO decision will confirm that the US is required to withdraw the Washington State tax measures.
Separately, the EU lodged an appeal in October 2016 against the WTO conclusions on EU compliance with the WTO ruling on the complaint by the United States on EU support to Airbus (DS 316) (see EUROPE 11645) and expects a decision at the start of 2018.
Airbus has noted the Appellate Body decision on the aid to the Boeing 777X, seen as the direct competitor of the Airbus A350. It, too, points out that, in DS 353, the WTO has confirmed that the subsidies to Boeing were illegal and that “an obligation for their withdrawal or removal of their adverse effects remains applicable”.
Airbus estimates that, “combining the different WTO rulings”, the cost to it in lost sales as a result of illegal aid received by Boeing comes to US $100 billion. “Boeing illegal subsidies are still illegal and need to be removed. If it is a ‘No’ or a ‘No No’ does not make big difference in global fair trade and play. The ‘game’ is far from over”, said the European aircraft manufacturer.
Airbus also reiterated its long-standing view that “this transatlantic spat … can only finally be resolved by negotiations aimed at finding a global agreement to come to a level playing field in government support for the large civil aircraft industry”. (Original version in French by Emmanuel Hagry)