Ruling on Airbus Subsidies Could Escalate Trade Tensions With Europe

Ruling on Airbus Subsidies Could Escalate Trade Tensions With Europe

A WTO appellate body found that the European Union and four of its member countries - the United Kingdom, France, Germany and Spain - didn't comply with prior rulings over subsidies, which gave Airbus an unfair advantage on the world market and hurt USA -based Boeing.

However, the Geneva watchdog dismissed USA claims that loans for Airbus's most popular models, the A320 and A330, were costing Boeing significant sales and in so doing narrowed the scope of one of the world's longest and costliest trade spats.

"This is expected to be the largest-ever WTO authorization of retaliatory tariffs", it said in a statement.

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.

The WTO said that the EU and four of its member states had provided $18bn in illegal state aid to the European aircraft maker to help launch the world's largest airliner, the A380, and its new long-haul model the A350.

Boeing hailed the "landmark ruling" from the WTO and said that the decision cleared the way for tariffs against European imports to the US.

The US Trade Representative said the ruling opens the way for placing tariffs on European Union goods unless it stops "harming USA interests".

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"Despite Boeing's rhetoric, it is clear that their position today is straightforward healthy: they have half the market and a full order book, they have clearly not been damaged by Airbus repayable loans", Airbus CEO Tom Enders said in a statement. It is under appeal and should be decided within the next year.

"The result is simple: Airbus pays back its loans, Boeing pays back nothing and continues to exploit the generosity of the USA taxpayer", outgoing Airbus CEO Tom Ender said.

Boeing shares were down 0.7% at 342.22 on the stock market today.

However, the amounts will depend on arbitration, expected to take around a year.

"Boeing is now at more than 90% failed claims".

The trade court in September ruled in Boeing's favor in another case brought by the European Union, overturning an earlier finding that $8.7 billion in state aid to Boeing for making the 777X in Washington was a prohibited subsidy. Without that, the additional loan repayment penalties, potential tariffs and public perception scorecard will put the European company at a significant disadvantage in its stated goal of dethroning the American company as the world's top aerospace company.

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