A review of US efforts to comply with a World Trade Organisation (WTO) ruling on illegal subsidies in the so-called “Boeing case” by the European Union shows that the US has not lived up to its obligations. The European Commission therefore decided to challenge the US non-compliance at the WTO.
On 24 September 2012, the EU received the compliance notice from the US in the WTO Dispute Settlement case 353 (“Boeing case”). The EU reviewed the measures presented by the US to assess if these were sufficient to comply with WTO rules, as the US claimed.
The lack of information in the US notification unfortunately facilitated a quick review which suggests that the US has neither withdrawn the illegal subsidies granted to Boeing, nor removed their adverse effects. The EU even has indications that the US could have actually granted more illegal subsidies to Boeing in the meantime.
As a consequence, the EU feels obliged to challenge US non-compliance in the WTO Boeing ruling. To that end, the EU is requesting that the United States enter into consultation regarding the notification it made on 24 September 2012.
“We had expected that the US would have finally complied in good faith with its international commitments and would have abided by the WTO rulings that clearly condemned US subsidies to Boeing” said EU Trade Commissioner Karel De Gucht. “We are disappointed that this does not seem to be the case. So, the US leaves us with no other choice but to insist on proper compliance before the World Trade Organisation. We are confident that this process will finally lead to a level playing field in the aircraft sector.”
Background
In March 2012, the WTO’s Appellate Body rejected the US appeal and found that US Federal and State governments granted between US$ 5 and 6 billion WTO-incompatible subsidies to Boeing between 1989 and 2006. Subsidies to be granted after this date are estimated to be at least US$3.1 billion. The Appellate Body went even further than the previous WTO Panel ruling in supporting the EU’s claims, notably by finding that the subsidies granted by the City of Wichita (Kansas) also flout WTO rules.
The Appellate Body DS 353 on Measures Affecting Trade in Large Civil Aircraft (“Boeing”) confirmed several of the key findings of the Panel report that certain subsides to Boeing have damaged the interests of the EU and Airbus, notably:
- Research and Development funding granted by NASA to Boeing – US$2.6 billion;
- Research and Development funding granted by the US Department of Defence to Boeing – up to US$1.2 billion
- Foreign Sales Corporation export subsidies – US$2.2 billion;
- Washington State tax breaks to a value of close to US$3.1 billion for the period 2006-24.
The Appellate Body expanded the findings against the US by determining that US$476 million subsidies granted by the City of Wichita (Kansas) are also causing adverse effects.
On 23 March 2012, the Dispute Settlement Body of the WTO adopted the Appellate Body report, giving six months to the US to either withdraw these illegal subsidies or remover their adverse effects, in line with WTO law provisions, and notably the Subsidies and Countervailing Measures agreement.
Next steps
Under a procedural “sequencing agreement” concluded between the EU and the US, the parties have 15 days to enter into consultations to resolve any disagreement. Thereafter, the EU has the right to establish a panel to review the issue of US compliance.
