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1. The EU's challenge of US subsidies to Boeing (DS 353: "the Boeing case")
Latest: Final Report issued to the parties by WTO on 31 January 2011. In its WTO challenge against the US, the EU has challenged various US Federal, State and local subsidies benefiting Boeing, totalling US $23.7 billion in WTO-inconsistent subsidies disbursed over the past two decades and up to 2024.
3. NASA and DOD have waived Intellectual Property Rights worth US $726.4 million, by transferring to Boeing, without compensation, valuable patents, trade secrets and data rights used by Boeing for manufacturing its Large Civil Aircraft. 4. NASA and DOD have together provided more than US $3 billion to Boeing for conducting independent research and to cover Boeing's costs when bidding for US government contracts. The US presents this support as "commercial transactions". In fact these are straight government grants to Boeing. 5. Washington State will provide a total of US $3.5 billion to Boeing in illegal subsidies through various tax breaks, tax rate reductions, interest subsidies and bond issuance. 6. The State of Illinois and the city of Chicago have provided numerous location incentives to Boeing including a relocation package, tax credits and rent subsidies. 7. Finally, Boeing continues to be eligible for US $2.2 billion in FSC (Foreign Sales Corporation) export subsidies, despite previous WTO rulings that these are prohibited subsidies under WTO law.
8. These massive subsidies from multiple US Government sources have enabled Boeing to develop new aircraft, notably the 787 at much lower cost, causing Airbus to lose sales, depressing its aircraft prices and unfairly lose market share to Boeing. 9. Unlike EU support, all the support granted by the US is non-repayable. 10. The Boeing case was launched in reaction to the US challenge of subsidies to Airbus and following the US' purported unilateral withdrawal from the 1992 US-EU Bilateral Agreement (see below).
Further details
The EU has demonstrated before the WTO panel that the subsidies granted to Boeing has allowed the company to engage in aggressive pricing of its aircraft causing lost sales, lost market share and price suppression to Airbus in a number of markets.
infrastructure projects for the exclusive benefit of Boeing). This package was made contingent upon Boeing's export performance, and is therefore a prohibited export subsidy. o State of Kansas A US $900 million package in the form of tax breaks and subsidised bonds, some of which are known as "Boeing Bonds" was provided by the State of Kansas and the City of Wichita. Boeing will benefit from these until 2024 o State of Illinois The State of Illinois and the City of Chicago provided specific subsidies to Boeing principally through various relocation benefits including tax credits on income, property tax abatements and lease compensation payments to entice Boeing to move its headquarters to Chicago, Illinois.
Click here for further details on US subsidies to Boeing (link to document entitled "Details of US subsidies to Boeing challenged by the EU" Click here for background document on the difference in support to Boeing and Airbus *(link to document 2support o Boeing and Airbus: separating eh myth from the facts") Click here to see the EU submissions to the WTO in this case and related information.
2. The US challenge of EU support for Airbus (DS 316 "the Airbus case")
2.1. Panel ruling and appeal by the EU On 23 March 2010, the WTO panel issued its restricted final report to the parties in the parallel Airbus case DS 316. The non-confidential version of the panel report was published on 30 June 2010. Despite the panel siding with the EU on a number of important claims made by the US, for a number of claims on which the panel found in favour of the US, the EU considers that legal errors have been made. On 21 July 2010, the EU lodged an appeal at the WTO Appellate Body and made its written submission on 16 August 2010. The US lodged its own cross-appeal has 23 August 2010. The first hearing of the Appellate Body has been scheduled for mid-November 2010 and a decision by the Appellate Body is not expected before the first half of 2011. 2.2 Summary of the panel's findings and the EU's appeal grounds :
(a)
The panel found that the US failed to demonstrate that any of the alleged support by the EU caused any price-based adverse effects (price undercutting, price depression and suppression) or any material injury to Boeing in the form of, for instance, job losses or decline in market share in the US market. The panel rejected the US claim that Repayable launch investment (RLI) is a "programme" reaching from 1970 into the indefinite future. The panel found that there can be no presumption of the existence of a subsidy for RLI. It determined that each instance of RLI must be examined on its own merits. The US has appealed The panel rejected 4 of the 7 of the export subsidy claims made by the US for RLI contracts (France A380, A340-500/600 and A330-200 and Spain A340-500/600). It also clearly established that support for Airbus' A350 aircraft was outside the scope of the panel. The 12 loans made by the European Investment Bank (EIB) to Airbus (period 19882002) challenged by the US were found to be non-specific loans and therefore permitted under WTO rules. The 1998 German government debt settlement with Airbus was cleared by the panel as Airbus Germany's outstanding liabilities had been established by means of an independent evaluation and Airbus repaid a sum above this market value. In addition, certain Spanish sub-federal measures were found to be non-specific, and road improvements in Toulouse, were found to be "general infrastructure" and therefore not a subsidy. UK support through grants from the Welsh Assembly and the R&D Technology programme was equally considered not to be a specific subsidy. In total, the panel rejected US claims concerning measures involving a financial contribution of more than 5 billion. The US has limited its cross-appeal to only two aspects of the findings: the panel's rejection of "RLI as a programme" and its rejection of certain US export subsidy claims. The remainder of the findings in favour of the EU therefore stand and cannot be reversed further in the appeal procedure.
(b)
Reimbursable Launch Investment (RLI) : the EU has appealed the finding that RLI for all Airbus models since 1967 has been found to be a subsidy on the basis that interest rates were below "market" interest rates. In addition, the EU has appealed the panel's finding that the 1992 Agreement (which set the minimum interest rates for RLI and with which the EU complied) was of no relevance to determining the existence of a subsidy and the panel's rejection of the EU's proposed project-specific risk-premium for RLI. Export subsidy claim: the EU has appealed the panel's finding that the RLI provided for the A380 by the Governments of Germany, the United Kingdom and Spain constitute prohibited export subsidies, on the basis that the panel did not demonstrate (and the facts did not show) that the granting of the launch aid by these Member States was contingent upon export performance. Infrastructure: The EU has appealed the panel's finding that three infrastructure measures (Mhlenberger Loch, Hamburg; Bremen Runway and Aroconstellation, Toulouse) involved specific subsidies since in each case, as consistently argued by the EU, the government in question provided the infrastructure at market rates and there is consequently no benefit. The panel found most of the regional investment aid measures in Spain and Germany to be specific subsidy.
Effects of changes in ownership and cash extractions: The panel did not take account of a number of share sales (notably the part privatization of Arospatiale) which, according to WTO case law, would have extinguished some of the prior subsidies. Arospatiale Equity Contributions: The EU has appealed the panel's findings that four French government capital contributions from 1987-1994 were subsidies, arguing that they complied with the usual investment practice of private investors, as evidenced by private investors making similar investments in Boeing at the time. R&D programmes: With the exception of the UK Technology Programme, the panel found all R&D support to be a specific subsidy. The EU has appealed the panel's finding that support to Airbus under the EU R&D Framework Programmes (from 2nd to 6the Framework Programmes) is de jure specific. The EU has also contested the inclusion of the Spanish PROFIT programme and French R&D support within the scope of the panel.
Adverse effects: The EU appeals the panel's finding that there is a single subsidized product (large civil aircraft), as proposed by the US, rather than a number of different products (e.g. 100-200 seats, 200-300 seats etc). The EU also appeals certain findings on lost sales and their causation on the basis that panel has simply assumed (on the basis of its "product launch" theory of causation) that, without subsidies, Airbus could never have launched aircraft to compete with Boeing and therefore all sales gained by Airbus were lost by Boeing due to subsidies. This reasoning is inconsistent with the panel's findings. The panel also failed to address the issue of the 1992 Agreement, when considering its adverse effects findings, although the EU has argued that the US "cannot be injured by something it has agreed to". Finally, the EU appeals the panel's findings that "Non-RLI" subsidies (i.e. other than RLI e.g. infrastructure, R&D) caused adverse effects to Boeing. The impact of the subsidies other than RLI on Airbus' ability to launch aircraft was never properly and separately assessed by the panel; this was really a case of "causation by association."
Temporal scope of the SCM Agreement: The EU has appealed the panel's finding that support granted prior to the entry into force of the WTO in 1995 (e.g. RLI to the A300, A310 and A320) should be subject to dispute settlement as actionable subsidies. For details and documents on this dispute please follow the link.