Business World

Saturday 18 November 2017

Airbus State Aid row could descend into an EU-US trade war

In a blow to Airbus, the World Trade Organisation criticised the new A350’s funding
In a blow to Airbus, the World Trade Organisation criticised the new A350’s funding

Julia Bradshaw

A fresh transatlantic trade war is in the offing after the World Trade Organisation (WTO) ruled this week against the European Union in a long-running legal battle over billions of euro of State Aid to aviation giant Airbus.

The WTO ruled so-called "launch aid" loans given to Airbus by EU members to develop its fleet had caused a "genuine and substantial" loss of sales for its competitor Boeing.

It also slammed the EU for failing to rein in billions of dollars in illegal subsidies, despite being told to do so.

Four EU member states - France, Germany, Spain and Britain - had not complied with WTO calls to phase out subsidies, the intergovernmental trade body said.

The dramatic ruling has set the stage for the United States to seek up to $10bn (€8.9bn) in annual trade tariffs on EU imports, according to Boeing.

It's the latest step in a more than decade-old trade spat between rivals Airbus and Boeing, pitting the European Union against the US. The Obama Administration hailed the decision an "important victory".

US trade representative Michael Froman called on the EU, Germany, France, the UK and Spain "to respect WTO rules".

"We have long maintained that EU aircraft subsidies have cost American companies tens of billions of dollars in lost revenue, which this report clearly proves. We will not tolerate our trading partners ignoring the rules at the expense of American workers and their families."

In a blow to Europe's long-held argument that Airbus' most recent jet, the A350, fell outside the case, the WTO said funding for it had been subsidised, but rejected US claims that it fell into the most serious category of "prohibited" aid.

Boeing executive vice president and general counsel J Michael Luttig said that "the day of reckoning for launch aid has finally arrived", adding: "The World Trade Organisation has now found that Airbus is and always has been a creature of government and of illegal government subsidy."

The case is the biggest to go before the WTO. It began in 2006, when the US government brought a claim to the WTO against the EU, alleging unfair state support for Airbus. Since then, both sides have won and lost complaints filed against one another.

Boeing's chairman and chief executive, Dennis Muilenburg, said the "historic ruling finally holds the EU and Airbus to account for their flouting of global trade rules. This long-awaited decision is a victory for fair trade worldwide and for US aerospace workers, in particular."

However, the win is likely to be short-lived for Boeing, as the WTO is due to make another ruling, which is expected to fault the US for indirect subsidies to Boeing through, among other things, state tax breaks.

The EU has suggested it will appeal the WTO findings, saying it found some of the report "unsatisfactory. "We are closely analysing the report," the European Commission said.

Airbus, for its part, claimed it conformed with most global trade commitments and denied that it broke WTO rules.

"We only needed to make limited changes in European policies and practices to comply," a spokesman said.

"The US started this dispute claiming Airbus was receiving illegal subsidies, but the WTO decided otherwise.

"We did what we needed to do and did it in the agreed timeframe. Airbus and its European partners met their obligations to withdraw any subsidy elements or eliminate adverse effects. Airbus wants common sense to prevail. Whatever Boeing will say, nobody will have to go to the bank. There have never been any repayments and there never will be, it is not in the spirit of WTO." (© Daily Telegraph, London)

Irish Independent

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