What just happened?
The WTO Appellate Body just rejected the EU’s final appeal, finding that European governments have failed to fully comply with past WTO rulings, which found that EU governments provided $22 billion in illegal subsidies to Airbus. The WTO has determined that these illegal subsidies are market-distorting and have ongoing harmful effects on the U.S. aerospace industry, necessarily resulting in an aerospace industry that is smaller and supporting many fewer jobs than would be the case under fair competitive conditions.
What happens next?
The appellate ruling opens the door for the U.S. government to pursue sanctions against European exports to the United States unless the Airbus-sponsoring governments come into compliance.
What must European governments do?
They must eliminate any ongoing harm from past subsidies, and they must end the illegal practices going forward. The most egregious subsidy is launch aid, which is European government support for the development of Airbus airplanes. Launch aid significantly reduces development costs and risk for Airbus programs. As the WTO has found, neither Airbus nor a single one of its airplane programs from the A300 to the A350 would even exist without launch aid. Nothing like launch aid exists in the United States.
How does the sanctions process work?
The U.S. Trade Representative will notify the WTO that it intends to pursue sanctions and seek its approval of both the magnitude of the tariffs to be imposed and the targets of those tariffs. The total amount of the tariffs will reflect what the WTO agrees is the harm the subsidies are causing the United States.
How long will it be before tariffs are imposed?
Tariffs could be in place by the spring of 2019 unless EU governments comply.
What is the status of the EU’s counter-cases?
The EU filed two counter-cases alleging U.S. subsidies to Boeing. One has been dismissed entirely. The vast majority of the allegations made in the other case likewise have been dismissed, and the United States has addressed the handful of rulings that went against it. There is now only one finding against the United States, concerning a Washington state tax incentive. That issue remains under appeal.
If the U.S. loses that appeal, will Boeing support compliance actions?
Boeing strongly agrees with the U.S. Trade Representative (USTR) that there are compelling reasons for the Appellate Body to overturn that lone finding and rule that the United States has complied across the board. But if that doesn’t happen, Boeing will support whatever steps are required to come into compliance.
How will the outcome of the EU case affect the U.S. case against European subsidies?
It will have no effect on the EU’s obligation to comply with the WTO’s ruling against the $22 billion of illegal subsidies Airbus has received. The cases are totally separate from a compliance standpoint.