November 18, 2019
Boeing-Airbus Subsidy Dispute: Recent Developments
On October 18, 2019, the United States imposed additional
Space Administration (NASA), the U.S. Department of
tariffs on $7.5 billion worth of U.S. imports from the
Defense, and other agencies. Furthermore, the EU claims
European Union (EU). The action, authorized by World
that Boeing receives subsidies in the form of tax reductions
Trade Organization (WTO) dispute settlement procedures,
and exemptions, as well as infrastructure support to develop
followed an investigation by the U.S. Trade Representative
and produce new aircraft.
(USTR), under Section 301 of the Trade Act of 1974. The
During the 1970s and 1980s, the United States and the EU
USTR determined that the EU had denied U.S. rights under
engaged in bilateral and multilateral negotiations to address
WTO agreements. Specifically, the USTR concluded that
their concerns. While these efforts ultimately failed, they
the EU and certain member states had not complied with a
led to two major agreements still in place today: the 1979
WTO Dispute Settlement Body (DSB) ruling
GATT Agreement on Trade and Civil Aircraft and the 1986
recommending the withdrawal of WTO-inconsistent
Civil Aircraft Sector Understanding (an annex to the
subsidies on the manufacture of large civil aircraft. In 2011,
the DSB confirmed that these subsidies breached the EU’s
Organisation for Economic Co-operation and
Development’s Arrangement on Officially Supported
WTO obligations under the 1994 General Agreement on
Export Credits). The United States also initiated dispute
Tariffs and Trade (GATT) and the Agreement on Subsidies
settlement cases under the GATT’s 1980 SCM Agreement.
and Countervailing Measures (SCM Agreement).
The United States and the EU subsequently reached a
The authorization to take countermeasures against the
bilateral agreement in 1992: the U.S.-EU Agreement on
EU—the largest amount in the WTO’s history—comes
Large Civil Aircraft (LCA Agreement). The agreement
after nearly 15 years of litigation at the WTO. The litigation
placed limits on government subsidies affecting large civil
involves the world’s two largest aerospace manufacturers,
aircraft manufactured by Airbus and Boeing, and it
U.S.-based Boeing and EU-based Airbus, which have
included a ban on future production support, a cap on
competed for years for dominance in the commercial airline
development support, a ceiling on indirect support, and
supply market. The United States successfully argued that
conditions on repayment terms.
Airbus had received billions of dollars in illegal subsidies,
Dispute Settlement at the WTO
which resulted in a loss to Boeing of significant market
Citing dissatisfaction with EU compliance with the 1992
share throughout the world. The U.S. action to impose
Agreement and failure to negotiate a more comprehensive
tariffs, consistent with the WTO arbitrator’s finding on the
deal on subsidies, the United States resorted to WTO
appropriate level of countermeasures, aims to pressure the
dispute settlement in 2004. It filed a case with the WTO
EU into either ending the subsidies or negotiating an
(WTO case DS316) and withdrew from the LCA
agreement with the United States. In a pending parallel
Agreement. In response, the EU immediately announced
dispute case against the United States, the WTO is expected
the initiation of a WTO dispute settlement case against the
to authorize the EU to seek remedies in the form of tariffs
United States (WTO case DS353) and rejected the U.S.
on U.S. exports to the EU, after the WTO determined
termination of the 1992 Agreement. After intense
earlier this year that the United States had also failed to
discussions in late 2004 and early 2005, both sides reached
abide by WTO subsidies rules in supporting Boeing.
an agreement on the terms of a new bilateral deal. They also
Due to the magnitude of U.S.-EU trade (of which civilian
agreed not to request WTO panels relating to the pending
aircraft, engines, and parts are a major component) and
disputes and not to commit new government support for
ongoing trade frictions, some Members of Congress are
aircraft development or production during negotiations for
closely monitoring developments in the WTO litigation and
the new deal. However, negotiations ultimately stalled and
in U.S.-EU negotiations.
both sides requested the establishment of WTO panels in
Background
May 2005. After multiple phases of proceedings since the
WTO first ruled in favor of the United States in 2010 (see
The United States and the EU have long claimed that the
text box), on October 2, 2019, the WTO issued its final
other either directly or indirectly subsidizes their domestic
ruling on the U.S. case against the EU, pursuant to Article
civil aircraft industry. According to the United States, the
22 of the Dispute Settlement Understanding (Compensation
EU and the governments of certain EU member states—
and the Suspension of Concessions).
France, Germany, Spain, and the United Kingdom (UK)—
have provided, over the years, subsidies to their respective
Key Developments in the U.S. Case since 2010
Airbus-affiliated companies to aid in the development,
 June 2010. The WTO dispute settlement panel ruled in favor of the
production, and marketing of large commercial aircraft
United States. It determined that some of the subsidies provided by
(e.g., through equity infusions, debt forgiveness, debt
the EU and certain member states for the manufacture of large civil
rollovers, marketing assistance, and alleged political and
aircraft violated the EU’s WTO commitments and had caused harm
to the interests of the United States. The EU appealed the panel’s
economic pressure on purchasing governments). The EU,
findings before the WTO Appellate Body (AB).
on the other hand, claims that Boeing benefits from U.S.
government support, mainly in the form of research and
development funds from the National Aeronautics and
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Boeing-Airbus Subsidy Dispute: Recent Developments

subject to additional duties. The list targets mainly the
May 2011. A WTO panel report, as amended by an AB report,
confirmed that EU and certain member state subsidies were WTO-
imports of the EU member states responsible for the illegal
inconsistent.
subsidies, but it is not limited to the aircraft industry

(Figure 1). The additional tariffs are expected to affect
June 2011. The DSB adopted the panel and AB reports and
recommended that the EU and certain member states bring the
approximately $7.5 billion worth of imports, or about 1.5%
WTO-inconsistent measures into compliance with WTO rules. The
of all U.S. imports from the EU in 2018. The WTO
EU and certain member states had until December 2011 to bring the
authorized the United States to impose additional ad
measures into compliance.
valorem duties—that is, based on the value of the import—
 December 2011. The EU asserted that it had implemented the DSB
of up to 100%; however, the USTR has indicated that “at
recommendations. The United States disagreed and requested
this time the tariff increases will be limited to 10 percent on
authorization from the DSB to impose countermeasures
commensurate with the adverse effects of the WTO-inconsistent
large civil aircraft and 25 percent on agricultural and other
measures. The EU referred the matter to arbitration to assess the
products” from the EU (Table 1). The tariffs are intended
proper level of any countermeasures.
to target primarily France, Germany, the UK, and Spain,
 January 2012. The United States and the EU entered into a
but the two other countries whose exports to the United
procedural agreement pursuant to which arbitration would be
States will be affected the most by the tariffs—in relative
suspended until after the WTO compliance panel and any appellate
terms—are Cyprus and Greece. By product category,
proceedings determined whether the EU had implemented the DSB
aircraft (mainly from France and Germany) accounts for
recommendations.
approximately 39% of the $7.5 billion of trade affected,
 May 2018. The DSB adopted the compliance panel and AB reports
while whiskies, liqueurs, and wine (mainly from the UK
confirming that the EU subsidies are WTO-inconsistent and continue
and France) account for 38% and food and agricultural
to cause adverse effects to U.S. interests.
products (mainly from Spain and France) account for 18%.
 July 2018. At the request of the United States, and in accordance
with the 2012 procedural agreement, the WTO arbitrator resumed
Table 1. Select U.S. Imports from the EU Affected by
its work (suspended in January 2012) to determine the level of
Section 301 Tariffs
countermeasures to be authorized as a result of the EU’s WTO-
Approximate
Additional
inconsistent subsidies.
Top U.S. Imports from
Share of
Average
Tariff as of
the EU Targeted by the
Tariff in
 April 12, 2019. The USTR initiated an investigation, under Section
Targeted
October 18,
Tariff Action
2018 (%)
301 of the Trade Act of 1974, to enforce U.S. rights in the WTO
Imports (%)
2019 (%)
case against the EU and certain member states.
Aircraft
39
0
10
 October 2, 2019. The WTO arbitrator concluded that the
Whiskies, Liqueurs
21
0
25
appropriate level of countermeasures for the United States to take
Wine
17
0.7
25
in response to the EU’s WTO-inconsistent subsidies amounts to
approximately $7.5 bil ion annual y.
Cheese, Dairy
9
10.8
25

Olives, Olive Products
October 9, 2019. Pursuant to Sections 301, 304, and 306 of the

5
1.5
25
Trade Act of 1974, the USTR determined to impose additional ad
Machinery, Tools
4
0.5
25
valorem duties of 10% and 25% on $7.5 bil ion worth of U.S. imports
Pork, Pork Products
from the EU.

2
0.1
25
Biscuits, Wafers


2
0
25
October 18, 2019. Section 301 tariffs on certain U.S. imports from
the EU went into effect.
Fruit, Fruit Products
1
9.0
25
Other
2
1.9
25
Figure 1. Top EU Trade Partners Affected by Section
Source: CRS with data and information from the U.S. International Trade
301 Tariffs
Commission and the Office of the USTR.
Notes: The analysis is based on USTR’s lists of products in Annex B, which
the agency published in the Federal Register on October 9, 2019 (84 FR 54245)
and October 18, 2019 (84 FR 55998). According to the USTR, the product
descriptions in Annex B are provided for informational purposes, may cover
only a portion of the HTSUS eight-digit subheadings, and do not necessarily
delimit the scope of the action. For detail, refer to formal language in Annex A
of the aforementioned Federal Register notices, which governs the tariff
treatment of the products that the tariff action covers. The estimated average
tariff rate is il ustrative, applies only to the subheadings in Annex B covered by
the tariff action, and is calculated by dividing estimated import duties col ected
by import value in 2018.
Outlook
The USTR has indicated that it will reevaluate the tariff
actions periodically based on the progress of its
negotiations with the EU. Negotiations could be affected if
the EU retaliates and imposes tariffs on U.S. exports, in
response to either these U.S. actions or an upcoming WTO

decision in the parallel EU dispute case against the United
Source: CRS with data and information from the U.S. International Trade
States. The WTO arbitrator has yet to estimate the harm
Commission and the Office of the USTR.
caused by U.S. illegal subsidies and authorize any EU
Section 301 Tariff Actions
countermeasures, but a decision is expected in early 2020.
Following the USTR’s Section 301 investigation and its
determination to enforce U.S. WTO rights, the USTR
Andres B. Schwarzenberg, Analyst in International Trade
published a list of 158 eight-digit product lines on the
and Finance
Harmonized Tariff Schedule of the United States (HTSUS)
IF11364
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Boeing-Airbus Subsidy Dispute: Recent Developments


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https://crsreports.congress.gov | IF11364 · VERSION 1 · NEW

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