WTO rules European Union failed to stop subsidies on some Airbus aircraft

May 16, 2018, 13:46
WTO rules European Union failed to stop subsidies on some Airbus aircraft

As Donald Trump threatens European companies with sanctions following his withdrawal from the United Nations framework agreement with Iran on its nuclear programme, the World Trade Organisation Appellate Body has concluded that Boeing's complaint of illegal subsidies to Airbus by some European governments is largely unproven under its rules.

As reported by the Reuters news agency, however, the Geneva watchdog dismissed USA claims that loans for Airbus's most popular models, the A320 and A330, were costing Boeing significant sales and in so doing narrowed the scope of one of the world's longest and costliest trade spats.

The European Commission argued that the WTO decision rejected most US claims and was its victory.

EU Trade Commissioner Cecilia Malmström said the WTO "has definitively rejected the USA challenge on the bulk of EU support to Airbus".

"This is a high-stakes battle", Douglas Holtz-Eakin, president of the American Action Forum, told Richard Quest on CNN's "Quest Means Business" on Tuesday.

The disputed funding to Airbus has cost U.S. aerospace manufacturers "tens of billions of dollars in lost sales", U.S. Trade Representative Robert Lighthizer said in a statement.

In a statement, the Chicago-based firm said those tariffs could amount to $22 billion (€18.6 billion), equivalent to the amount in illegal subsidies that Airbus has received from the European Union, according to Boeing's tally.

Boeing chairman and chief executive officer (CEO) Dennis Muilenburg said yesterday: "Today's final ruling sends a clear message: disregard for the rules and illegal subsidies is not tolerated".

According to the European Commission (EC), the WTO has determined "the majority of EU support to Airbus challenged by the U.S. had expired in 2011" and the EU is not required to take any further action regarding state support for the A300, A310, A320 and A330/A340 aircraft models. WTO rules allow it to target any industry since all goods fall into one category. But before the United States can impose tariffs, it will have to request an estimate of damages from a WTO arbitration panel, and Brussels has the right to challenge the amount.

The trade body also upheld an earlier finding that the European Union aid had no adverse effect on the market for single-aisle jet sales, the largest source of profit for Boeing and Airbus. The US government filed a similar claim that year over European subsidies to Airbus. The report came almost 14 years after America brought the dispute to the WTO at the behest of Boeing, Airbus's closest rival.

A ruling in favor of the European aerospace giant would, in turn, allow Brussels to impose its own punitive tariffs on U.S. goods under WTO rule.

Airbus General Counsel John Harrison said: "Airbus recognizes the importance of the WTO and the Appellate Body's findings and will do what is necessary to correct any errors and this report confirms the efforts we are making".

Airbus says Boeing's willingness to deliver the last rites to the A380 contradicts Boeing's claim that it has been damaged by the same aircraft.

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