World Trade Organisation finds in favour of US in Airbus subsidy dispute

World Trade Organisation finds in favour of US in Airbus subsidy dispute

The World Trade Organisation has found that the European Union has failed to honour multiple previous rulings and has provided more than $22 billion of illegal subsidies to European aircraft maker Airbus.

After examining this case for more than a decade, the WTO has determined the EU must end its unfair business practices and remedy the ongoing harm caused by the illegal subsidies.

The ruling in favour of the United States, which brought the case on behalf of plane-maker Boeing, brings an end to a dispute which began in 2004.

The organisation initially found in favour of the US in 2011.

The US subsequently complained that the EU and certain member countries were not in compliance with the decision, prompting further disagreement between the two sides.

The decision clears the way for the United States Trade Representative to seek remedies in the form of tariffs against European imports to the United States.

The authorised tariffs are likely to total billions in duties per year, unless and until Airbus addresses the illegal subsidies it received from European governments for its most recently launched airplanes.

It is anticipated that US tariffs will be authorised up to the amount of annual harm this market-distorting tactic is causing.

ADVERTISEMENT

Tariffs could be scheduled as early as 2019.

This is expected to be the largest-ever WTO authorisation of retaliatory tariffs.

“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,” said Dennis Muilenburg, Boeing chairman.

“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.

“We appreciate the tireless efforts of the US Trade Representative over the 14 years of this investigation to strengthen the global aerospace industry by ending illegal subsidies.”

Just one finding against the United States now remains before the WTO, which concerns a Washington state tax measure.

It is under appeal and should be decided later this year or in early 2019.

“Boeing believes that ruling will be reversed, but if not, Boeing has pledged to do whatever necessary to come into full compliance in the interest of upholding rules-based trade, which is essential to fairness and the future prosperity of the global aerospace industry,” added a statement from the company.

Airbus is also waiting for the outcome of a similar WTO case challenging US government support for Boeing.

Airbus chief executive Tom Enders explained: “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.”

Such non-withdrawn subsidies continue to cause massive adverse effects in the form of lost sales for Airbus, argued the European plane maker.

The 787 Washington State tax breaks alone have been confirmed by the WTO to have caused Airbus to lose at least US$16 billion in sales, the company added.

The total amount of adverse effects, or lost sales to Airbus since the beginning of these disputes is estimated to be over US$100 billion.