WTO gives Boeing lift with Airbus ruling

Posted on September 22, 2016

A Airbus A320neo takes off for its first...A Airbus A320neo takes off for its first test flight, on September 25, 2014 in Blagnac near Toulouse. The first outing by the A320neo the revamped and more fuel efficient version of Airbuss most popular single aisle passenger jet begins the test flight phase ahead of the aircrafts entry into service at the end of next year. AFP PHOTO / ERIC CABANISERIC CABANIS/AFP/Getty Images The Boeing Co. Max 737 jet takes off from Renton Municipal Airport in Renton, Washington, U.S., on Friday, Jan. 29, 2016. Boeing Co.'s newest 737 jetliner gunned its engines and headed into rain-streaked skies Friday, with profit and pride riding on its wings. Photographer: Mike Kane/Bloomberg©FT Graphic

The Airbus A320 Neo and Boeing 737 Max

The EU has failed to eliminate billions of dollars in illegal aid to Airbus, according to the World Trade Organisation, handing US rival Boeing one of the biggest triumphs on the global stage in its 12-year battle with the European aircraft maker.

The WTO also found Airbus’s newest passenger jet, its popular A350 which competes head to head with Boeing’s 787 Dreamliner, would never have flown without the “direct and indirect effects” of past EU subsidies.

    Washington, which claims the WTO ruling applies to some $22bn in illegal aid, hailed the findings as a “sweeping victory” that would redress years of damage to the US aerospace industry from wrongful European subsidies.

    The European Commission insisted parts of the panel’s analysis were flawed and said it was considering an appeal. “We are closely analysing the report,” said an EU spokesman, noting two other WTO rulings are expected in coming months on billions of dollars in US subsidies for Boeing.

    The row has long been one of the most contentious battles in the global trade system. The dispute reached a head in 2011 when the WTO ruled both Boeing — which won government money through contracts for defence and space business — and Airbus — which received aid to launch many aircraft repayable only if they were profitable — had collected billions in unlawful assistance.

    Thursday’s ruling determined the EU failed to comply with the 2011 order to unwind the illegal assistance within six months. If the ruling stands, the US would have the right to impose tariffs on any goods imported from the EU; Washington has threatened levies totalling $10bn.

    The ruling was not a total victory for Washington. The WTO rejected US claims that support from the four countries where Airbus planes are built — France, Germany, the UK and Spain — for the A350 or Airbus’s troubled A380 superjumbo constituted prohibited export subsidies.

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    Still, Michael Froman, the US trade representative, said it vindicated American claims that its aerospace industry had been wrongly harmed by government support for Airbus.

    “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,” Mr Froman said. “We will not tolerate our trading partners ignoring the rules at the expense of American workers and their families.”

    Airbus claimed the US charges rejected by the WTO validated Europe’s model of launching aircraft with repayable loans.

    “Once again the WTO has confirmed that Europe’s chosen method of partnering with its large civil-aircraft industry is acceptable under international trade law,” the spokeswoman said. “The US grants and tax breaks are not.”

    Trade experts said one of the few things that would prevent the US from imposing tariffs in the case would be a negotiated settlement. But they said that was unlikely as long as both sides showed no signs of backing down or attempting to reach a compromise.

    Thursday’s ruling is expected to be followed next year by a similar determination over whether the US has unwound its aid to Boeing. The WTO is also weighing the EU’s claim against tax breaks granted Boeing by Washington state.

    The dispute began in 2004 as Airbus began to grow rapidly and take market share from Boeing. That year, the US pulled out of a bilateral agreement on aerospace subsidies, claiming the EU had failed to phase out aid to Airbus as promised. Since then a tit-for-tat battle has raged between the two with the WTO and its appeals panel finding repeatedly that both sides have benefited from illegal subsidies.

    We will not tolerate our trading partners ignoring the rules at the expense of American workers and their families

    – Michael Froman, US trade representative

    The WTO ruling comes as tensions between the EU and US have already hit one of their highest levels following Brussels’ order for Apple to pay up to €13bn in back taxes to Ireland, plus interest. Deep divisions over a transatlantic trade deal have added to the strain in EU-US relations, with little prospect that they will strike a deal this year as planned.

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

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