The European Union (EU) asked the World Trade Organization (WTO) yesterday for permission to slap the United States with $12 billion in annual trade sanctions because the organization found this year that Boeing [BA] received improper U.S. government support.
This call for U.S. penalties is the latest move in a trans-Atlantic trade dispute which also involves a U.S. challenge to support European countries gave airplane maker Airbus. This two-part trade battle was particularly heated in the halls of Congress when European Aeronautic Defence and Space Company (EADS), Airbus’ parent company, competed for the lucrative Air Force tanker contract that Boeing ultimately won last year. Lawmakers backing Boeing from states including Washington have continued to keep close tabs on the trade fight.
The WTO issued a final determination in March that Boeing received illegal U.S. subsidies. U.S. Trade Representative (USTR) Ron Kirk interprets the figure to be no higher than $4 billion. Yet European officials point to $5.3 billion in federal subsidies, $2 billion in future state and local support, and Pentagon and NASA research grants.
The issue is again arising now because the United States had six months, until last Saturday, to comply with the WTO ruling. The U.S. maintains it has ended improper subsidies for Boeing, while the EU argues it has not.
Meanwhile, in the separate U.S. complaint about European aid to Airbus, the WTO determined in June of 2011 that Airbus received $18 billion in subsidies from EU nations, most of which was deemed illegal. The United States may seek to impose sanctions against the EU for allegedly not removing improper European support Airbus.
For the Boeing dispute, the EU said yesterday it requested the WTO’s Dispute Settlement Body’s approval to impose $12 billion in annual “countermeasures” against the United States. That figure is “based on estimates of the damages suffered by the EU due to unfair and biased competition from the U.S. industry,” the EU said.
“This follows the EU’s assessment that the United States had not lived up to its obligation to remove its illegal subsidies in the aircraft sector, as required by the WTO rulings that clearly condemned US subsidies to Boeing,” it argued.
The EU said in its statement that the countermeasures could consist of the suspension of tariff concession on U.S. products. The EU has agreed to not apply sanctions against the United States without approval from the WTO.
USTR spokeswoman Nkenge Harmon said U.S. officials “remain confident” that they have taken steps that “have brought us into full compliance with our WTO obligations.”
She maintains that the EU was far more to blame for aid to Airbus than the United States was for helping Boeing.
“The WTO found that the EU granted $18 billion in subsidized financing, which caused 342 lost sales for the United States,” Harmon said over e-mail. “The WTO found $2-4 billion, mostly in subsidized research, against the United States, with 118 lost sales for Airbus.”
The U.S. government submitted a report to the WTO and EU on Sunday stating it believes it is in compliance with the March WTO ruling.
At the time, Boeing said in a statement it “fully supports the actions the U.S. government announced today that it has taken to address the relatively small amounts of subsidy that the World Trade Organization identified as inconsistent with its rules.”
The company said the United States “has now complied with the WTO ruling.” It argued Airbus and its European government supporters “have thumbed their noses at the WTO,” pointing to continued European government support of Airbus and the lack of removal of subsidies found to be illegal by the WTO.
Airbus, in a statement, slammed Boeing’s alleged “failure to address the clear verdict it suffered in the WTO’s March 2012 final judgment.”
“We regret that Boeing continues a legal battle that should have long been resolved by a mutual agreement,” Airbus spokeswoman Maggie Bergsma said. “We made offers time and again but are ready to fight it through if the other side wishes to do so.”
Going forward, EU and U.S. officials will deliberate over the steps the United States has taken to comply with the March WTO ruling. Sanctions against the United States cannot be applied without subsequent EU action and then a determination in its favor from a WTO compliance panel.
Such a compliance panel, meanwhile, currently is weighing the U.S. asserting that the EU has not complied with the ruling from last year against European subsidies to Airbus.