Airbus ruling may strain trade ties with Europe

16 May, 2018, 13:45 | Author: Eric Barnett
  • DEVELOPING NEWS: WTO rules EU failed to stop subsidies on some Airbus aircraft

The World Trade Organization has upheld a USA claim that the European Union has continued to provide illegal subsidies to Airbus, a France-based aircraft manufacturer.

But the WTO also dismissed US claims that loans for the A320 and A330, the most popular Airbus models, were also costing Boeing significant sales, thus narrowing the scope of the ruling.

The fight dates to 2004, when European Union authorities said Boeing received $19 billion in unfair subsidies from federal and state governments between 1989 and 2006.

The EU highlighted earlier wins in a parallel case against US subsidies for Boeing, and Airbus said this could in turn spark EU sanctions against the United States once the timetable for that case reaches the same point later this year.

Shares of Airbus reversed earlier gains to trade down as much as 1.8 percent immediately after the ruling was published.

"Today the WTO Appellate Body, the highest WTO court, has definitively rejected the U.S. challenge on the bulk of EU support to Airbus, and agreed that the EU has largely complied with its original findings", declared EU Commissioner for Trade Cecilia Malmström: "Significantly, it dismissed the vast majority of the USA claims that this support had damaged Boeing's aircraft sales".

The WTO report coincides with mounting trade tensions over USA aluminium and steel tariffs and the impact on European firms of Washington's decision to exit the Iran nuclear pact. WTO rules allow it to target any industry since all goods fall into one category. That figure includes the many subsidies that the WTO said were lawful. Boeing claims that the EU provided the European aerospace giant more than $22 billion in illegal subsidies.

Boeing predicted such tariffs could reach billions of dollars a year starting as early as 2019.

Airbus CEO Tom Enders hit back saying that the ruling yesterday was "only half the story". In the coming months, WTO's appelate court is set to rule on Airbus's counter-claim that Boeing received more than $20 billion in illegal aid under tax breaks granted by Washington state.

European officials seized on Boeing's recent criticism of the A380's poor sales record as a way to limit any estimates of damage to Boeing caused by subsidies for the double-decker jet.

But the organization also overturned a previous ruling that found the subsidies were hurting sales of the single-aisle 737, Boeing's most popular plane. As airlines expand into the Middle East and China, both companies will be vying for new business, he said. In a statement, he also noted that Boeing would find it hard to prove before the arbitration panel any significant damage from the subsidies granted to Airbus. It is anticipated that US tariffs will be authorized up to the amount of annual harm the subsidies are determined to cause.

A big trade ruling in the long battle between Airbus and Boeing left both sides cheering.

"Companies should not have to compete with governments - that is what this case is about", said Robert Novick, co-managing partner at Boeing's trade lawyers WilmerHale.



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