Los Angeles, CA – The European Union (EU) has filed a dispute with the WTO Secretariat in Geneva against the U.S. regarding “conditional tax incentives” offered by the state of Washington to “commercial airplane manufacturers.”
The EU asserts in the dispute – a not-so-veiled slap at Boeing and its new 777X commercial jetliner – that the “vastly expanded tax incentives are conditioned on local content requirements prohibited by the WTO Agreement on Subsidies and Countervailing Measures.”
The request for consultations was made, the European Commission (EC) said, in response to a decision by the state of Washington in November 2013, to extend to 2040 subsidies to Boeing that were originally granted through 2024.
The EC is charging that the broadened subsidies were contrary to the WTO rules, “because they require the beneficiary to use domestic goods rather than imported ones.”
“The subsidies scheme extension is estimated to be worth $8.7 billion and will be the largest subsidy for the civil aerospace industry in U.S. history,” according to a Commission statement.
The 777X is a new version of Boeing’s successful 777 twin-engine wide-body jet. It’s scheduled to go into service in 2020. The company has reportedly received orders amounting to billions of dollars for the aircraft from a number of air carriers.
The EU’s request Friday for consultations is the first step in a dispute within the WTO’s Dispute Settlement System.
WTO rules call for Washington, D.C. to respond to the request within 10 days, but due to the Christmas holidays, the EU has agreed to extend the deadline until January 7.
The consultations will give the U.S. and the EU the opportunity to discuss the dispute and reach a solution without proceeding to litigation. The talks must begin within 30 days and generally cannot last longer than two months.
If both parties fail to reach an agreement, the EU can request that a “panel of experts” be commissioned to study the dispute and reach a verdict.