Exclusive: EU may challenge $8.7 billion U.S. tax breaks in Boeing-Airbus trade dispute - sources

Mon May 19, 2014 3:54am EDT
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By Tim Hepher

PARIS (Reuters) - The European Union is considering raising the pressure on the United States in the world's largest trade dispute by challenging tax breaks that encouraged planemaker Boeing (BA.N: Quote) to keep production of its latest jet in Washington state, people familiar with the matter said on Friday.

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 sanctions.

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: Quote), 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.   Continued...

An Airbus A380 performs during a flying display at the 47th Paris Air Show at Le Bourget airport near Paris, June 21, 2007. REUTERS/Pascal Rossignol