Airbus and EU see end to US subsidies spat with final concessions

The Airbus factory in southern France, 21 March 2018. [EPA- EFE/GUILLAUME HORCAJUELO]

Aerospace giant Airbus announced on Friday (24 July) that it has made changes to existing aircraft contracts in order to come into line with a World Trade Organisation (WTO) ruling on subsidies. The firm and the EU both insist that it “removes any justification for US tariffs”.

The European planemaker has agreed with the French and Spanish governments to tweak the interest rates and risk assessment benchmarks in its so-called Repayable Launch Investment (RLI) contracts for its hugely popular A350 aircraft.

As part of an ongoing spat with the US that has lasted 16 years and stoked transatlantic trade tensions, the WTO decided late last year that some subsidies paid to Airbus had not been legal, prompting Washington to slap tariffs on European products.

RLIs allow national governments to front some of the costs for new plane development, which are then repaid with interest over the course of nearly two decades. The new changes bring the interest payments in line with what the WTO has suggested.

“We have fully complied with all the WTO requirements. These additional amendments to the A350 RLIs demonstrate that Airbus has left no stone unturned to find a way towards a solution,” said Airbus CEO Guillaume Faury.

The WTO’s ruling authorised the US to impose tariffs worth $7.5 billion per year, in what was the Geneva-based body’s largest ever award. Faury said that the sanctions bit extra hard due to the coronavirus outbreak.

Airbus is planning big job cuts and has already scaled back aircraft production, while bitter rival Boeing has also felt the pitch due to economic uncertainty suffered by airlines. In June, the two firms sold just one plane between them.

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EU trade chief Phil Hogan said in a statement that the RLI changes now mean Airbus is in full compliance with the WTO ruling and that it paves the way for a quick settlement to the case.

“Unjustified tariffs on European products are not acceptable and, arising from the compliance in the Airbus case, we insist that the United States lifts these unjustified tariffs immediately,” the Irish official added.

French finance minister Bruno Le Maire, whose government last month made €15 billion available for the aerospace sector recovery fund, also said that the US must now remove tariffs on European products, in particular French wine.

Hogan reiterated his previous position that “the EU will be ready to fully avail itself of its own sanction rights” if the US refuses to lift its sanctions. The Irish Commissioner also reiterated that a decision on Boeing’s own subsidies case is due in the coming weeks.

Depending on the size of that award, Brussels will judge which products should be hit with countermeasures and has already published an exhaustive list of potential targets, which is out for public consultation.

EURACTIV contacted the US representation to the EU for comment on the Airbus development but at time of publishing had received no reply.

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[Edited by Zoran Radosavljevic]

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