Aircraft

The European Commission says it will make good its threat to reintroduce trade sanctions against the USA in two months’ time unless it falls into line with a World Trade Organisation (WTO) ruling outlawing millions of dollars worth of tax breaks for US companies operating overseas, such as Boeing.

A WTO panel last month upheld a decision condemning the tax breaks, affirming previous judgements over the US Foreign Sales Corporation (FSC) legislation which the trade body judged to breach global trade rules by offering tax exemptions benefiting more than 6,000 US exporters.

The EC says it prefers to find a negotiated and WTO-compatible outcome to the FSC dispute without having to impose sanctions on targeted products.

While the FSC law has been repealed , the WTO appeal body says transitional provisions under the 2004 American Jobs Creation Act still break its rules, with the EU estimating tax-break advantages will bring Boeing at least $615 million over the next decade under grandfathered benefits.

In correspondence with the US trade representative Robert Portman seen by Flight International, EC trade commissioner Peter Mandelson says he could seek to extend the 60-day deadline for the suspended sanctions, but warns that “getting enough votes in the Council has...become more complicated in view of the dispute on aircraft subsidies”.