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
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
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