EU wants $12bn US sanctions in Boeing row

2012-09-27 16:51

Geneva - The European Union has asked the World Trade Organisation (WTO) for the right to impose annual trade sanctions worth up to $12bn on the United States in retaliation for illegal US subsidies to planemaker Boeing.

The EU request is the latest legal move in the world’s biggest trade dispute. The wrangling over subsidies given to Boeing and its European rival Airbus stretches back more than seven years.

“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,” the EU said in a statement.

The figure of $12bn was “based on estimates of the damage suffered by the EU due to unfair and biased competition from the US industry”, it added.

Airbus, which is owned by aerospace group EADS, said the figure was justified by the WTO’s finding that the effect of the “particularly pervasive” subsidies was significantly larger than their face value. It also said that the launch of Boeing’s 787 aircraft would not have been possible without illegal subsidies.

“It is the largest WTO penalty ever requested and it follows the worst loss a party has seen in the history of the WTO,” Airbus said in a statement.

In two parallel legal disputes, the WTO has ruled that both companies have received billions of dollars in illegal subsidies to support their large civil aircraft programmes.

In Boeing’s case, the deadline for the United States to comply with the WTO ruling was last Sunday, but the EU has rejected US assurances that the handouts have stopped. 

The European demand for sanctions mirrors a US claim to the right to impose up to $10bn of sanctions on the EU. 

Both claims are effectively frozen until other legal avenues have been exhausted, and many experts expect the two sides will settle the dispute outside the courtroom rather than let the tit-for-tat litigation drag on for years.

“We regret that Boeing continues a legal battle that should have long been resolved by a mutual agreement. We made offers time and again but are ready to fight it through if the other side wishes to do so,” Airbus spokesperson Maggie Bergsma said.

There was no immediate reaction from the US Trade Representative’s office. However, US ambassador to the WTO Michael Punke, speaking to reporters in Geneva on Wednesday, said the EU was much more at fault than the United States.

“Here is the key figure to keep in mind, for those who are keeping score at home on the Boeing-Airbus discussion: through the WTO dispute resolution process there have been identified $19bn of illegal financing by Airbus. The equivalent number that has been identified for Boeing is $3bn to $4bn. So that’s the starting point for our discussion,” Punke said.

“Beyond that, it is very much our contention that many of the types of subsidies that have been identified in the European context are very much still at play, including, for example, in the launch of the (Airbus) A350 and the A380.” 

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