WTO rules on EU subsidies, paving the way for retaliatory tariffs

WTO rules on EU subsidies, paving the way for retaliatory tariffs

The latest bout between Airbus and Boeing, played out at the World Trade Organisation (WTO) Court, has gone the way of all others – a goal-less draw. Its teams claim to have deserved the win – or even got the best of the opposition, once again leaving each side’s fans claiming a moral victory. Undoubtedly this will go to another replay, much to the dismay of the neutrals.

WTO rules on EU subsidies, paving the way for retaliatory tariffs

The WTO Appellate Body has ruled that the European Union paid billions of dollars in unfair subsidies to Airbus.

The case has been running since 2006. The final ruling dismissed an appeal by Airbus and found that an EU “launch aid” provided to Airbus resulted in lost sales for Boeing in the twin-aisle and very-large aircraft markets.

Tariffs

The United States Trade Representative (USTR) is now set to seek remedies in the form of tariffs against European imports to the United States. Boeing said the tariffs would be likely to “total billions in duties per year”, unless and until Airbus addresses the subsidies it received from European governments for its most recently launched airplanes.

Dennis Muilenburg, Boeing chairman, president and CEO, said: "Today's final ruling sends a clear message: disregard for the rules and illegal subsidies is not tolerated. The commercial success of products and services should be driven by their merits and not by market-distorting actions.

“Now that the WTO has issued its final ruling, it is incumbent upon all parties to fully comply as such actions will ultimately produce the best outcomes for our customers and the mutual health of our industry."

“Half the story”

Airbus didn’t see it quite the same way, saying that the report is only “half the story”.

A second ruling dealing with the case brought by the EU against Boeing is expected later this year.

Airbus claims the Boeing case could find well in excess of $20 billion worth of “egregious” non-repaid, illegal subsidies causing over $100 billion in damage to global trade.”

An Airbus statement said: “In its report, the Appellate Body confirms the legality of the loan partnership approach between Airbus and European governments…The WTO confirmed that all aspects of the A320 and A330 programs are now in full compliance, and that only minor action remains on the A380. On A350, minor elements of the RLI (repayable launch investments) remain to be addressed. Airbus is currently implementing changes to respond to these findings.”

Airbus CEO, Tom Enders, commented: “Today’s significant legal success for the European aviation industry confirms our strategy which we have followed over all those years of the dispute. Of course, today’s report is really only half the story – the other half coming out later this year will rule strongly on Boeing’s subsidies and we’ll see then where the balance lies.”

Enders added: “The result is simple: Airbus pays back its loans, Boeing pays back nothing and continues to exploit the generosity of the US taxpayer. Despite Boeing’s rhetoric, it is clear that their position today is straightforward healthy: they have half the market and a full order book, they have clearly not been damaged by Airbus repayable loans.”

Sort it out

ADS Chief Executive, Paul Everitt, said: “International trade disputes are unhelpful and create threats for jobs, prosperity and productivity. Aerospace is a global industry where low tariffs have helped manufacturers to deliver safe, efficient and increasingly clean aircraft. Tariffs destroy trade, restrict healthy competition and reduce the choices available to consumers.

“We urge EU and US authorities to work together to resolve their differences and sustain open and competitive markets.”

Subscribe to our weekly newsletter

Join The Discussion