Published: Wed, May 16, 2018
Finance | By Loren Pratt

European Union still providing illegal subsidies to Airbus

European Union still providing illegal subsidies to Airbus

The WTO report specifically says that the Airbus subsidies hurt Boeing through lost sales of large widebody jets to several major global airlines and in markets such as the European Union, Australia, China and the United Arab Emirates.

Airbus shares closed down 0.9 percent.

"Today the WTO Appellate Body, the highest WTO court, has definitively rejected the USA challenge on the bulk of EU support to Airbus, and agreed that the EU has largely complied with its original findings", declared EU Commissioner for Trade Cecilia Malmström: "Significantly, it dismissed the vast majority of the United States claims that this support had damaged Boeing's aircraft sales".

"This report confirms once and for all that the European Union has long ignored WTO rules, and even worse, European Union aircraft subsidies have cost American aerospace companies tens of billions of dollars in lost revenue", US Trade Representative Robert Lighthizer said in a statement.

"President Trump has been clear that we will use every available tool to ensure free and fair trade benefits American workers", Robert Lighthizer, the U.S. trade representative, said after the ruling. "The other half coming out later this year will rule strongly on Boeing's subsidies and we'll see then where the balance lies". "That ends today", he said.

The size of US tariffs to be allowed will be determined through a WTO arbitration process, and will be based on the annual harm to USA and Boeing - losses that the US had previously pegged as ranging from $7 billion to $10 billion a year. It said it would comply swiftly on the rest.

Barring a settlement, both sides are expected to push for billions of dollars in sanctions annually, but the amounts will depend on arbitration, expected to take around a year.

According to the European Commission (EC), the WTO has determined "the majority of EU support to Airbus challenged by the U.S. had expired in 2011" and the EU is not required to take any further action regarding state support for the A300, A310, A320 and A330/A340 aircraft models.

The CEO of Airbus, Tom Enders said, "Today's report is really only half the story".

The WTO case has yielded 5,000 pages of filings and cost tens of millions of dollars. It is anticipated that USA tariffs will be authorized up to the amount of annual harm the subsidies are determined to cause. It has meanwhile levelled significant subsidy claims against Boeing.

Airbus says Boeing's willingness to deliver the last rites to the A380 contradicts Boeing's claim that it has been damaged by the same aircraft.

"Companies should not have to compete with governments - that is what this case is about", said Robert Novick, co-managing partner at Boeing's trade lawyers WilmerHale.

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