The potential move would open a tense new phase in the decade-old
formal trade dispute over aircraft industry aid, as Brussels and
Washington argue about whether they have complied with rulings by
the World Trade Organization, which in turn could set the tone for
Both the EU and United States claimed victory when the WTO ruled
between 2010 and 2012 against billions of dollars of support for
Boeing and European rival Airbus <AIR.PA>, in a pair of cases
spanning thousands of pages but lacking a final resolution.
But new aircraft developments by both companies have sparked fresh
disputes over whether the two sides have obeyed those WTO rulings or
simply continued aiding their industries as before.
The United States says European governments ignored the global trade
court by agreeing to lend money to Airbus for the development of its
new A350 jet, even though an internal row between Airbus and Germany
has blocked part of that support.
Now, European officials are said to be getting ready to hit back by
questioning $8.7 billion of tax breaks from Washington state and the
issue may be discussed by ministers from Britain, France, Germany
and Spain at next week's Berlin Airshow.
European Commission trade spokesman John Clancy called the
Washington measure "the largest targeted state tax incentive for the
civil aerospace industry in U.S. history."
"The EU is very concerned about the extension of these subsidies
which indeed figure - originally and as extended - in the EU's WTO
case on subsidies to Boeing, but it declines to comment further on
the ongoing litigation," Clancy said by email.
The latest maneuvers risk deepening an already bitter industrial and
trade fight between the two planemakers as the 406-seat Boeing 777X
and a large version of the A350 compete for billions of dollars of
sales from around the end of the decade.
Washington's state legislature agreed the tax breaks in November as
Boeing considered whether to build the newest version of successful
777 wide-body jet in the Seattle area.
The package exceeds the estimated cost of developing the 777X,
suggesting Boeing is getting an aircraft "fully funded by the U.S.
taxpayer," Airbus spokeswoman Maggie Bergsma said.
Boeing said tax decisions by Washington were meant for the whole
industry in the state, including some Airbus suppliers, and have
been designed to comply with WTO rulings.
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"The $8.7 billion figure that's mentioned is the state's estimate of
the total value of its incentives for the entire commercial
aerospace industry over 16 years," Boeing spokesman Charlie Miller
said. "The benefit to Boeing will only be a fraction of that
In 2012 WTO appeal judges partly upheld EU claims that tax breaks
from Washington state were specific - meaning they were aimed at a
company or group of companies - and were harmful subsidies, and had
cost Airbus sales by allowing Boeing to drive down prices.
But they rejected EU claims that these subsidies also fell into the
more severe category of illegal export subsidies.
In a parallel case, WTO judges found that Airbus benefited from aid
including illegal export subsidies in the form of government
development loans, also damaging its rival's sales.
The A350 and 777X are not part of the WTO case but are expected to
be raised in compliance procedures that could determine what, if
any, sanctions result from the record trade row.
The WTO is expected to report on whether Europe has obeyed WTO
rulings in the summer, followed by a similar report on the U.S.
track record which is expected about six months later.
Those findings are likely to include a level of damage that would
set the bar for possible sanctions, but most trade analysts say that
in practice these could be years away.
(Editing by Greg Mahlich)
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