Supplementary evidence from Department
for Business, Innovation and Skills
Further to the Department's memorandum to the
Committee on 8 May we are providing additional information on
the World Trade Organisation investigation into government support
given to Airbus and Boeing.
BACKGROUND
1. The EU and US are in dispute over government
support given to Airbus and Boeing respectively. The two sides
took their complaints to the WTO in 2004 where a long and increasingly
complicated dispute settlement process is underway. Each case
individually represents the largest the WTO has ever handled and
the unprecedented drawn out timescales reflect the complexities
of the cases.
2. The European Commission Legal Services
leads on trade issues before the WTO on behalf of the EU.
"Defensive" case
3. On 15 November 2006, the US made its
first formal submission to the WTO Panel covering the US complaints
of unfair EU subsidies to Airbus (primarily launch investment
from France, Germany, Spain and the UK, but also infrastructure
support and R&T support from both the four "partner"
governments and the European Framework Programme). The EU has
strongly defended its actions. The WTO Panel met for the first
time in March 2007 to hear the arguments from both sides and the
second hearing was held in July.
4. The confidential interim report was issued
to the parties by the WTO on 4 September 2009. The report is currently
in the factual correction stage and will be finalised—and
translated for distribution to the WTO membership in the Spring.
The findings in the report are likely to be appealed and the whole
process, including the implementation phase, could be dragged
out until 2012-14
"Offensive" case
5. The EU has a parallel case against US
subsidies for Boeing, primarily through US Government (NASA, Department
of Defense) R&T programmes, but also tax breaks at State level.
The EU case against the US will be carried out in a similar timescale,
but started four months later. The EU made its first formal submission
to the WTO Panel on 22 March 2007, the US responded on 9 July
2007 and hearings before a (separate) WTO Panel were held 26-27
September 2007 and 15-16 January 2008.
6. Europe claims a total of US$23.7 billion
in subsidies to Boeing over the past 20 years, including:
— US$17 billion in funding and support
from NASA, DOD, Dept of Commerce and Department of Labor—with
the bulk coming from NASA/DOD R&D subsidies. The latter two
also grant Boeing IPR to valuable research results including patents,
trade secrets and data rights.
— Local/State level support from states
of Washington, Kansas and Illinois of over $800 million in benefits
(primarily tax breaks), and commitments of over $4 billion in
additional benefits beginning in 2007.
UK Position after issuance of interim report
7. The first report issued earlier this
month is a confidential, interim report and only the first of
two being considered by the WTO in relation to large civil aircraft.
8. The defensive case was a mixed result
and it is not yet clear what the full implications are for either
previous RLI commitments or the A350 XWB—work in this regard
is ongoing with other Member States, Airbus and the EC. Due to
highly confidential status of report, it is not possible to go
into any further detail as to what interim report contains.
9. The WTO process, including appeal and
implementation stages, could run for at least another three years.
The case against Boeing is expected to report in the coming months.
It is only when reading the final reports of the two cases (and
perhaps following review by the WTO Appellate Body) together that
the full impact on funding structures for large civil aircraft
will be understood.
10. We have consistently argued for a negotiated
settlement to the protracted dispute. It is still seen likely
that both parties will enter in negotiations to settle the case,
although the US will be unwilling to come to the table until at
least after the second case reports.
22 October 2009
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