Boeing's WTO Default Prompts $ 12 Bn in Annual Sanctions

The EU today filed a request for the WTO to grant USD 12 Bn in annual sanctions, following Boeing’s failure to address the clear verdict it suffered in the WTO’s March 2012 final judgment. It is the largest WTO penalty ever requested and it follows the worst loss a party has seen in the history of the WTO. Boeing, in March 2012, had been given a six months reprieve to implement the judgment. The WTO had condemned state, local and federal aid Boeing received in support of every one of Boeing’s current commercial aircraft programs. In a filing with the WTO, it became clear that Boeing has failed to implement the judgment. With that failure, the case moves to its next phase: sanctions following confirmation that Boeing continues to distort the marketplace with taxpayer-funded subsidies.

“Airbus is grateful to the EU Commission for taking consequential action,” said Airbus spokesperson Maggie Bergsma, “However, this is nothing but the next step in a trade conflict that was launched in 2004 by Boeing. Boeing has been denying the decades of government support for years but was finally faced with a sweeping judgement in March. 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.”

The WTO final verdict had called in March for:

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  • Withdrawal of “at least $5.3 billion” of federal subsidies already received by Boeing.
  • Elimination of an additional $2 billion in illegal state and local subsidies due in the future under existing illegal schemes.
  • Termination of all U.S. Department of Defense (DOD) and NASA research grants to Boeing, including funding, Boeing use of government facilities and the illegal transfer of IP rights to Boeing

The EU’s requested 12 Bn annual penalty is justified by the WTO panel confirmation that the effect of the subsidies is significantly larger than their face value in light of their “particularly pervasive” nature. For example, according to the WTO, Boeing would not have been able to launch the 787 without illegal subsidies. Today’s request belies Boeing’s argument that the WTO’s findings will have no relevant consequences for Boeing.

Source: European Aeronautic Defence and Space Company EADS N.V. (Paris: EAD.PA)
Date: Sep 27, 2012