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Europe to Seek Sanctions Against U.S. Over Boeing Subsidies Europe to Seek Sanctions Against U.S. Over Boeing Subsidies
(about 5 hours later)
PARIS — The European Union inched closer to an open trans-Atlantic trade war on Thursday, saying that it would ask the World Trade Organization for the right to impose up to $12 billion in annual trade sanctions against the United States in retaliation for subsidies to Boeing which Brussels says give the plane maker an unfair advantage over its European rival, Airbus. PARIS — The European Union inched closer to a trans-Atlantic trade war on Thursday, saying that it would seek to impose up to $12 billion a year in sanctions against the United States in retaliation for U.S. government subsidies to Boeing.
The move was the latest step in a seven-year battle between the two sides over aircraft industry subsidies, one of the most complex and voluminous cases ever brought before the global trade body. The European Commission, the E.U. executive, said it was seeking the sanctions to compensate for the impact of illegal subsidies to Boeing that it said gave Boeing an unfair advantage over its European archrival, Airbus. The move, which follows a similar trade threat against Europe made by Washington this year, is the latest salvo in a seven-year battle over aircraft subsidies.
In a statement, the E.U. trade commission said it had chosen to seek sanctions after reviewing a list of remedies submitted this week by the U.S. Trade Representative, which it said were insufficient. A World Trade Organization appellate body affirmed in March that Boeing had received at least $5 billion in improper subsidies from the U.S. government to develop the 787 Dreamliner and other aircraft. But in a separate case, the organization found that Airbus had benefited from four decades of improper subsidies from European governments. The W.T.O. ordered both sides to end the subsidies.
“The United States had not lived up to its obligation to remove its illegal subsidies in the aircraft sector, as required by the W.T.O. rulings that clearly condemned U.S. subsidies to Boeing,” the commission said. In a statement, the European Commission said it had decided to ask the W.T.O. for permission to impose trade sanctions after reviewing a list of remedies submitted this week by the U.S. Trade Representative — remedies the commission said were insufficient.
A statement from the W.T.O., which is based in Geneva, said that the European request was expected to be formally submitted at a meeting of the organization’s dispute settlement body on Oct. 23. The commission said it had acted because “the United States had not lived up to its obligation to remove its illegal subsidies in the aircraft sector, as required by the W.T.O. rulings that clearly condemned U.S. subsidies to Boeing.”
A W.T.O. appellate body affirmed in March that Boeing had received at least $5 billion in improper subsidies from the U.S. government to develop its 787 Dreamliner and other jet models. But in a separate case, the global trade body found that Airbus, too, had benefited from four decades of improper subsidies from European governments. In a statement, the W.T.O. said that the European request was expected to be formally submitted at a meeting of the organization’s dispute settlement body on Oct. 23.
The earlier ruling against Airbus concluded that the European plane maker had received $15 billion in loans from European governments at below-market interest rates and several billion dollars in grants to build the A380 superjumbo and five other best-selling models. The trade panel did not quantify the savings from the lower interest rates, but said that Airbus could not have introduced many of its models when it did without the loans. The W.T.O. has also concluded that Airbus, a unit of European Aeronautic Defense & Space, received $15 billion in loans from European governments at below-market interest rates, as well as several billion dollars in grants to build the A380 superjumbo and five other best-selling models.
It was not immediately clear if Washington planned to respond to the E.U. move with a similar request, although in the past U.S. officials have said they could consider $7 billion to $10 billion in retaliatory measures. The trade panel did not quantify the savings from the lower interest rates, but said that without the loans, Airbus could not have introduced many of its models when it did.
Spokespeople for the U.S. Trade Representative and Boeing did not immediately respond to requests for comment. In April, Washington rejected the European Union’s list of remedies to eliminate the subsidies to Airbus that the W.T.O. had deemed illegal. The U.S. government said it would seek the trade body’s approval to impose $7 billion to $10 billion in retaliatory measures. A W.T.O panel was expected to rule on that request around the end of this year.
On Sunday, the Office of the U.S. Trade Representative said Washington had eliminated certain payments that Boeing had been receiving from the Defense Department and the National Aeronautics and Space Administration. A number of tax breaks and beneficial funding programs to Boeing had also been removed, the trade representative said. The European Commission said Tuesday, however, that these steps did not fully offset the adverse trade effects to Airbus.
Charlie Miller, a Boeing spokesman, said he was not surprised by the Union’s move but declined to offer further comment.
Nkenge Harmon, a spokeswoman for the U.S. trade office, said Washington remained “confident” that the remedies announced Sunday had brought the United States into “ full compliance” with its W.T.O. obligations.
In a document filed with the W.T.O., the European Commission did not specify what form its sanctions would take. It said a list would be drafted “in due course” and did not say what type of goods and services might be targeted.
In a statement, Airbus said it was grateful to the European Commission for “taking consequential action” on its behalf but stressed that it was still prepared to seek a negotiated settlement of the dispute.In a statement, Airbus said it was grateful to the European Commission for “taking consequential action” on its behalf but stressed that it was still prepared to seek a negotiated settlement of the dispute.
“We regret that Boeing continues a legal battle that should have long been resolved by a mutual agreement,” said Maggie Bergsma, an Airbus spokeswoman. “We made offers time and again, but are ready to fight it through if the other side wishes to do so.”“We regret that Boeing continues a legal battle that should have long been resolved by a mutual agreement,” said Maggie Bergsma, an Airbus spokeswoman. “We made offers time and again, but are ready to fight it through if the other side wishes to do so.”
Trade experts said they hoped the two sides would eventually return to the negotiating table.
“Given the size of damage claims on both sides, my guess is that the case will become the lead item for U.S.-E.U. trade negotiations in 2013,” Gary Clyde Hufbauer, a senior fellow at the Peterson Institute for International Economics in Washington, said by e-mail.
Some observers noted that the Union’s move came just two weeks after Airbus’s parent company, EADS, announced that it was in talks about a possible $49 billion merger with BAE Systems of Britain. The combined company would eclipse Boeing as the world’s largest defense and aerospace group.
But while the timing was perhaps politically awkward, few analysts expected the latest trade flare-up to influence U.S. regulators charged with reviewing the combination of EADS and BAE.
“I’d rather hope that all of these decisions are in the hands of independent authorities,” said Richard Aboulafia, an aerospace consultant at the Teal Group in Fairfax, Virginia. “Right now, I don’t think it matters. Both sides are going to continue doing exactly what they want to support their industries in economic times like these.”