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WTO Decision Expected Any Day on EU
Challenge to Alleged State and Local Subsidies for Boeing

The world's two largest commercial aircraft companies, Boeing and Airbus, are pitted against each other in World Trade Organization litigation.  The European Union and the United States submitted dueling complaints to the WTO in the fall of 2004. Each party complains that the other has violated the WTO agreement on Subsidies and Countervailing Measures (SCM). 

In September 2009, the WTO issued an interim report finding that Airbus received billions in SCM-illegal subsidies from European countries.

A second interim report on a European Union complaint that U.S. federal and state governments illegally subsidized Boeing is expected this month. The ruling on the EU complaint could have significant implications for state and local governments in the United States that provide tax and financial incentives designed to attract or retain industry. 

The case against Airbus. According to the Office of the U.S. Trade Representative (USTR), Airbus over its 35 year history has benefited from massive amounts of EU member-state and EU subsidies that have enabled the company to create a full product line of aircraft.

Every major Airbus aircraft model has been financed, in whole or in part, with EU government subsidies taking the form of ‘launch aid’ - financing with no or low rates of interest and repayment tied to sales of the aircraft. If the sales of a particular model are less than expected, Airbus does not have to repay the remainder of the financing.

EU governments also have forgiven Airbus debt, provided equity infusions, provided dedicated infrastructure support, and provided substantial amounts of research and development funds for civil aircraft projects.

USTR claims that EU subsidies to Airbus are “prohibited export subsidies” and “actionable subsidies adversely affecting the United States,” in violation of the SCM agreement.

The case against Boeing. The core of the EU's challenge relates to the research and development support provided to Boeing by the U.S. Department of Defense and NASA, as well as subsidy packages tailor-made for Boeing in the states of Washington, Kansas and Illinois.

The EU alleges that the State of Washington gave Boeing $3.4 billion in tax incentives; the City of Everett gave Boeing $67.5 million in tax reductions; and state and local governments in Washington provided another $395 million in other subsidies including workforce training, infrastructure improvements, and assumption of legal costs, among others.

The EU also alleges that the City of Wichita, Kansas provided tax breaks to Boeing worth $783 million; and, the State of Kansas pays the interest on bonds financing aircraft production facilities worth another $122 million to Boeing. The EU finally alleges that the State of Illinois, the City of Chicago, and Cook County provided tax incentives and direct payment of relocation and other costs to Boeing worth $24.8 million.

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