Europe faces $10bn in retaliatory duties after WTO ruling in Airbus case

A380_British Airways

The A-380 is the world's largest airliner. []

The US and Boeing declared victory after the Word Trade Organisation concluded yesterday (22 September) that subsidies for aircraft maker Airbus were illegal. However, the US said it was “ready to negotiate” before slapping on retaliatory duties.

The international trade body concluded on Thursday (22 September) that the EU and its member states failed to withdraw subsidies for Airbus and “take appropriate steps to remove the adverse effects”.

US Trade Representative Michael Froman said the WTO found that Airbus had won aircraft sales deals over Boeing in Europe, China, India and other countries helped by $22 billion in illegal subsidies from the EU.

“This report is a sweeping victory for the United States and its aerospace workers,” Froman commented.

An earlier judgement in 2011 partially overturned accusations that EU states had given Airbus illegal subsidies to develop the world’s largest jetliner, the A380, but said the aircraft maker did receive billions of dollars of unfair aid that harmed Boeing.

All sides claim victory in WTO Airbus ruling

Trade judges on Wednesday (18 May) partially overturned a ruling that had accused EU states of giving Airbus illegal subsidies, but said the aircraft maker did receive billions of dollars of unfair aid that harmed Boeing.

US ‘ready to negotiate’

Boeing claimed that the EU and its member states put in place new subsidies to Airbus for a grand total of almost $22 billion. That includes $15 billion in launch aid for each Airbus commercial aircraft program from the A300 through the A380, and $2 billion in non-launch aid subsidies.

According to the US company, Washington could obtain the WTO’s permission to impose retaliatory duties of up to $10 billion.

US officials did not say whether they were preparing to request WTO approval for retaliatory duties yet, as Airbus can appeal the ruling, according to AFP.

“We are ready to negotiate if (the EU) is interested,” a US trade official said.

Serious blow

The conclusions of the WTO´s compliance panel report represented a serious blow for the EU. A European Commission spokesperson commented that “certain findings” of the report are “unsatisfactory”.

Still, EU officials welcomed  that the panel rejected new US claims that repayable support for the airbus models A350 XWB and A380 are “prohibited subsidies”.

The Commission spokesperson recalled that there are two additional WTO rulings expected in the coming months as regards the American subsidies for Boeing.

Boeing Executive Vice President and General Counsel J. Michael Luttig stressed that these cases “are separate and distinct”.

“The EU lost this compliance case for the simple reason that it did nothing to remedy its massive subsidies which have had profound effects on the commercial airplane market,” Luttig said. “Whatever happens in the European cases against the United States, launch aid and other illegal government support for Airbus will now come to an end.”

Airbus plays down ruling

Meanwhile, Airbus played down the consequences of the ruling. An Airbus spokeswoman said the company had already implemented some “limited changes” needed to align with WTO rules.

“We will possibly address the few still remaining points indicated by the report in an appeal,” the spokeswoman said. “As a point of fact Airbus and its European partners met their obligations to withdraw any subsidy elements or eliminate adverse effects,” she said.

“What a contrast to Boeing which has laid the biggest egg in subsidy history with what is expected to be the very first finding in any of our cases of a prohibited subsidy for 777,” the spokeswoman added.

The EU and the US have been locked in a dispute over state aid to large commercial aircraft builders Airbus and Boeing since Washington and Brussels filed complaints against one another in 2004.

According to international trade rules, government support for manufacturing is illegal if it can be proven to harm the companies or industries of another World Trade Organisation (WTO) member state.

  • WTO:  compliance panel report.

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