Sep 10 2009

Shelby: Blatant Defiance Unacceptable

Senator Richard C. Shelby (R-Ala.), a member of the Defense Appropriations Subcommittee, today sent a letter to U.S. Trade Representative Ron Kirk reiterating his concern that Members of Congress are misusing the World Trade Organization’s recently-released interim report on the pending U.S. trade dispute with the European Union over subsidies for aerospace development.  On September 4, the WTO issued a preliminary report rejecting most of a complaint filed by the U.S. on behalf of Boeing against the European Union regarding aircraft financing programs for Airbus. 

The full text of the letter is below. 

September 10, 2009

Ambassador Ron Kirk
U.S. Trade Representative
Office of the United States Trade Representative
600 17th Street NW
Washington, DC 20208

Dear Ambassador Kirk,

            I am writing to follow-up on our meeting yesterday regarding the World Trade Organization’s (WTO) interim report on the pending U.S. trade dispute with the European Union over subsidies for aerospace development.   

            As we discussed, many press reports are not accurately describing the complete results of the report.  In fact, on every Airbus airplane there was a claim against, the loan mechanism used was ruled legal under the WTO.  It is also my understanding that Reimbursable Launch Investment or “launch aid,” was determined to be an acceptable funding mechanism by the WTO.  Reimbursable Launch Investment was used on the A330-200, the airframe that will be offered for the tanker contract.  The A330-200 was found to have received investment aid within the permissible benchmarks under WTO guidelines – meaning that the funding received was not found to be a prohibited subsidy.  Most importantly, as you stated in our meeting, Boeing was not materially injured by any action taken by Airbus.

           I remain concerned with numerous press statements by Members of Congress seeking retaliation on this decision through the upcoming tanker contract.  It would be a grave mistake, with severe consequences to both our economy and trade relations, to use a preliminary WTO report as justification for restricting the ability of our military to procure the best equipment possible.  The interim report is only an initial recommendation and the first step in a multi-year process.  It does not outline or authorize sanctions – from the WTO or any member nation.  Through multi-lateral agreements, member nations of the WTO have agreed not to unilaterally act before the WTO process is concluded.  Any sanction or penalty created through a U.S. government contract in response to this report would violate Article 23 of WTO rules.  Further, these Members must remember that the European Union has a pending case against the United States challenging various U.S federal and state subsidies to Boeing as well.  Allowing blatant defiance of the law by Members of Congress to supersede the interests of the warfighter and damage our trade relationships is unacceptable.  Simply put, Members of Congress making up their own rules to suit their own purposes must not be tolerated.

            I appreciate your time on this critical issue and look forward to working with you in the future.


                                                                                    Richard Shelby