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WTO issues its ‘final ruling’ against Airbus, opening the way for tariffs (or talks)

Alan Boyle
European loan programs for developing Airbus’ A380 jumbo jet were among the issues addressed in a ruling from the World Trade Organization. (Airbus / e*m Photo / H. Gousse)

The World Trade Organization today issued its final report in a long-running dispute over subsidies for Airbus jets, potentially clearing the way for the U.S. to levy harsh tariffs on European imports.

It’s more likely, however, that U.S. and European officials will bear down on negotiations over complaints that also touch on the Boeing Co.’s tax breaks from Washington state.

Today’s WTO appellate panel ruling determined that Airbus received improper loan subsidies from European governments to launch its A350 and A380 jets. Similar claims, relating to the A320 and A330 lines, were dismissed.

In a statement, U.S. Trade Representative Robert Lighthizer said the ruling “confirms once and for all that the EU has long ignored WTO rules.”

“Unless the EU finally takes action to stop breaking the rules and harming U.S. interests, the United States will have to move forward with countermeasures on EU products,” Lighthizer said.

Boeing CEO Dennis Muilenburg said the ruling affirmed his company’s complaints. “Today’s final ruling sends a clear message: disregard for the rules and illegal subsidies is not tolerated,” he said in a statement.

Muilenburg said “it is incumbent upon all parties to fully comply [with the ruling] as such actions will ultimately produce the best outcomes for our customers and the mutual health of our industry.”

Theoretically, billions of dollars in tariffs could be levied on European imports beginning as early as next year. But the WTO is also considering a parallel case involving an estimated $8.7 billion in tax incentives that the Washington Legislature awarded to Boeing. Those tax breaks, which extend through 2040, were awarded in exchange for putting 777X jet production facilities in Washington state.

The final ruling in that case is expected later this year, and if the European Union wins the right to levy tariffs on U.S. goods, that could level the playing field in the dispute. That’s the spin that Airbus put on the latest developments.

“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,” Airbus CEO Tom Enders said in a statement.

Airbus said the WTO required only “minor” action on the loan programs.

“Airbus is currently implementing changes to respond to these findings,” it said. “This means that any potential U.S. sanctions, now likely to be minor compared to what we expect on the case against Boeing’s subsidies, could result to be counterproductive and ill-timed.”

Airbus characterized the Washington state tax breaks as a “corporate welfare scheme,” and said Boeing “reportedly is also actively seeking further illegal tax breaks for the planned construction of the midsized B797 aircraft.”

For its part, Boeing said it believes the WTO appellate panel will reverse an earlier ruling against the tax breaks. “But if not, Boeing has pledged to do whatever necessary to come into full compliance in the interest of upholding rules-based trade,” the company said.

Parallel aerospace trade disputes have been percolating for nearly 14 years, well before the tax breaks came into the picture.

The Trump administration has been more vocal about U.S. trade complaints, but its first effort to levy tariffs resulting from an aerospace dispute – namely, the battle between Boeing and Canadian planemaker Bombardier – was stymied when the U.S. International Trade Commission batted down a proposed 292 percent tariff on jet sales.

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