The European Commission (EC) is likely to exclude all aerospace products from a list of sanctions approved by the World Trade Organisation (WTO). The international trade body ruled late last month that Europe can impose over $4 billion per year in trade sanctions as a result of the Foreign Sales Corporation (FSC) rules of US tax law (Flight International, 10-16 September).
The USA has operated the tax break, ostensibly to offset European value-added tax rebates, for around two decades, changing the definitions to stay within international trade guidelines. The EC has drawn up a preliminary list of over 6,000 products worth €12 billion ($12 billion) and is now discussing how to cut the list to 4,000 with European companies.
Representatives from Airbus are understood to have met with the EC last week and recommended that aerospace products be kept off the final list. Boeing, which is estimated by the Commission to benefit by around $1 billion a year from the FSC, is likely to be able to absorb any loss of tax break, but smaller suppliers, many of which also supply Airbus, would be forced to increase their prices. US trade representatives believe the sanctions should have been limited to under $1 billion per year and say Boeing only benefits by around $200 million per year. The USA hopes to find a new scheme acceptable to the WTO, rather than have any sanctions imposed.
Source: Flight International