U.S. May Increase Tariffs After WTO Rejects EU Claims Over Airbus (excerpt)
(Source: Reuters; published Dec. 02, 2019)
By Tim Hepher, Philip Blenkinsop
A new compliance report from the Geneva trade watchdog found that the Airbus A380 and A350 jetliners continue to be subsidised as a result of past European government loans.
U.S. Trade Representative Robert Lighthizer said the decision affirmed that European subsidies to Airbus continued to harm the U.S. aerospace industry, and strong action was required to eliminate such market-distorting subsidies.
It was the latest salvo in a record transatlantic trade dispute involving mutual claims of illegal aircraft subsidies, which comes to a head at a time of rising global trade tensions and has grabbed the attention of financial markets this year.
The United States was in October awarded the right to impose tariffs on $7.5 billion of annual EU imports in its case against Airbus. It placed partial tariffs on most Airbus jets and products from cheese to olives and single-malt whisky.
A decision on retaliation rights for the EU in a parallel case on aid for Boeing (BA.N) is due next year.
Officials on both sides have expressed support for a negotiated settlement, while accusing the other of failing to take the prospect of a negotiated solution seriously.
In Monday’s finding, a three-person panel rejected EU claims that a recent decision by Airbus to stop producing the slow-selling A380 meant the giant airliner could no longer be seen as a threat to Boeing, whose competing 747 is also out of fashion. (ed of excerpt)
Click here for the full story, on the Reuters website.
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WTO Rules Tariffs Should Be Reduced By Around Two Billion Dollars Following Airbus Compliance Measures
(Source: Airbus; issued Dec. 02, 2019)
This is the direct result of the panel finding that the loans for the development of the A380 no longer have an impact on Boeing sales and that therefore the value of the lost sales no longer exists.
The US Trade Representative (USTR) now should accept the reality that loans made to Airbus in the early 2000s – for the development of a product that is no longer being sold – do not have an impact on Boeing sales.
The panel also asserts that the amendments already made to the A350 loan agreements are not sufficient to fully align the loans with market conditions. Based on these findings, Airbus would support to appeal this report, as per WTO rules.
In May 2018, the WTO Appellate Body clarified that the EU and Airbus have achieved compliance with respect to the vast majority of measures at issue, but considered that some adjustments were needed to the A380 and A350 loans, or to remedy their market effects. Measures have therefore been taken on both programmes relating to the respective loans of Members States or on the market effects those loans had on Boeing.
Airbus remains committed to working with the EU and its member states to comply with the WTO recommendations. With the wide range of additional steps to comply with WTO findings since 2018, the EU and Airbus have demonstrated their willingness to ensure a fair trade environment respecting international trade agreements.
By contrast, the concerned US parties have not taken visible action to address its illegal subsidies, despite the WTO Appellate Body findings in April 2019 that the US had failed to withdraw the subsidies benefiting Boeing, or to remedy their market effects through the 737 MAX, 787 or 777X.
The EU therefore requested the WTO’s authorization to impose countermeasures on US imports, in line with its estimate of the effects of the US subsidies on Airbus which comes to $12 billion per year. That decision is expected in the spring of 2020 and would provide the EU authorisation to impose tariffs on imports of US products, including Boeing aircraft.
Airbus continues to encourage the USTR to accept the European Commission’s invitation to engage in meaningful discussions to find a settlement to these disputes. A negotiated settlement is the only way to restore and preserve the free, fair competition and open trade that is essential for an essential and global aviation industry.
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United States Wins for the Sixth Time in Airbus Subsidies Dispute; Panel Rejects EU’s Latest Claims that it Removed Illegal Subsidies
(Source: U.S. Trade Representative; issued Dec. 02, 2019)
The WTO recently valued the harm caused by these subsidies at $7.5 billion. Today’s findings reaffirmed that the subsidies continue to cause adverse effects, and found further that European governments even extended the subsidies by renegotiating launch aid with Airbus. Furthermore, the WTO panel found that this massive EU corporate welfare continues to cost American aerospace companies significant lost revenue.
“Today’s findings confirm that, despite losing in five previous WTO reports, Europe remains more focused on generating meritless litigation than it is in addressing the massive subsidies to Airbus that continue to harm the U.S. aerospace industry and its workers,” U.S. Trade Representative Robert Lighthizer said. “The EU’s frivolous case proves that strong action is needed to convince the EU that its interests lie in eliminating these market-distorting subsidies now and in the future, so that our industries can compete on a level playing field.”
Today’s report marks the sixth time that the WTO has found that EU subsidies to Airbus break WTO rules. In this latest iteration, the EU tried yet again to show that minor changes to its Airbus subsidization package were enough to eliminate the WTO inconsistencies identified in the past. The WTO panel again rejected all of these claims and instead found that European governments had extended the subsidies by renegotiating the launch aid in a way even more favorable to Airbus.
As a result, the panel found that the subsidies caused the Boeing 777, 787, and 747 aircraft to lose sales and market share to Airbus – sales that would have meant more revenue for U.S. producers and jobs for U.S. workers.
As a result of the EU’s failure to address these subsidies, on October 18, the United States imposed tariffs of 10 percent on large civil aircraft and 25 percent on agricultural and other products, with the bulk of these tariffs being applied to imports from France, Germany, Spain, and the United Kingdom – the four countries responsible for the illegal subsidies.
In light of today’s report and the lack of progress in efforts to resolve this dispute, the United States is initiating a process to assess increasing the tariff rates and subjecting additional EU products to the tariffs. USTR will publish a Federal Register Notice regarding that process later this week.
Additional Background Information
In May 2011, the WTO Appellate Body confirmed that the EU and four of its member States (Germany, France, the UK, and Spain) conferred more than $18 billion in subsidized financing to Airbus, and that this caused Boeing to lose sales of more than 300 aircraft and significant market share throughout the world. On October 14, the WTO authorized the United States to apply $7.5 billion per year in countermeasures – nearly twice the largest previous award in WTO history. Accordingly, the United States recently began applying tariffs on EU goods. Click here to view the list of products that are subject to additional duties.
In contrast, the WTO rejected the EU assertion in the EU’s counter-complaint that U.S. subsidies were responsible for the viability of large civil aircraft production in the United States. The WTO found that only a 0.19 percent reduction in a Washington State tax was inconsistent with WTO rules.
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