WTO Allows U.S. to Impose $7.5 billion of Duties in Airbus Row

 - October 2, 2019, 2:19 PM

Trade tensions between the U.S. and the European Union reached the aerospace sector on Wednesday as the World Trade Organization (WTO) authorized Washington to impose tariffs worth $7.5 billion annually on imports of products from the UK, France, Germany, Spain—the so-called Airbus nations—and the wider EU. The approval marked the latest chapter in the long-running legal saga over subsidies to Airbus and prompted Brussels to warn it “would have no other option than to do the same” in the equally long-running dispute over Boeing subsidies. Both sides filed a complaint at the WTO on October 6, 2004, though the parallel cases have followed different timetables. The EU filed a second complaint over subsidies to Boeing in 2014.

EU commissioner for trade Cecilia Malmström called on the U.S. to work out a “fair and balanced solution” for the respective aircraft industries and to respond to the bloc’s proposals for a new regime on aircraft subsidies. “The aircraft sector is amongst the most complex industries in the world, from the development, production, and financing point of view,” she said. “The specificity of the sector calls for comprehensive subsidy disciplines so that all players compete on an equal footing.” The WTO dispute settlement system has found both the EU and the U.S. at fault for continuing to provide certain unlawful subsidies to their aircraft manufacturers, she pointed out, asserting that the mutual imposition of countermeasures would harm global trade and the aviation industry on both sides of the Atlantic.

“Europe is facing tariffs today because Airbus has refused for years to comply with WTO rulings,” a Boeing spokesperson told AIN. “Unfortunately, Airbus’s non-compliance will negatively impact European member states, industries, and businesses completely unrelated to Airbus’s actions, as well as Airbus’s airline customers.” Airbus could still completely avoid the tariffs by fully complying with its obligations, he said. “We hope it will finally do that.”

In a clear indication that the dispute remains far from over, the UK government insisted it and the other Airbus nations have taken steps to bring their support fully in line with WTO rulings. “In contrast, the U.S. has taken no steps to bring its support to Boeing into compliance with WTO law,” it stated. While stressing that resorting to tariffs does not serve the interests of the UK, the EU, or the U.S., it also noted it seeks “confirmation from the WTO that the UK has complied fully with WTO rulings regarding support to Airbus, and should not be subject to tariffs.” The UK is set to leave the EU on October 31.

Airbus CEO Guillaume Faury followed the EU’s rationale and said he hoped the two sides would agree to find a negotiated solution before creating “serious damage” to the aviation industry. If applied, the tariffs on both sides will put high costs on the acquisition of new aircraft for both U.S. and EU airlines, the European OEM warned. Close to 40 percent of Airbus’s aircraft-related procurement comes from U.S. aerospace.

Wednesday’s decision of the WTO arbitrator panel didn’t come unexpectedly, though the U.S. had requested authorization to impose countermeasures of up to $11 billion. It follows the Geneva-based body’s ruling that the EU has failed to withdraw the full amount of government support given by member states to Airbus for the development of the A380 and the A350. Likewise, the WTO has ruled against U.S. subsidies to Boeing, and could equally grant the EU rights to impose countermeasures against the U.S.

The EC published a preliminary list of U.S. products it wants considered for countermeasures in April.