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WTO Opens Door For US Retaliation In Airbus Subsidy Saga

16 May 2018

A World Trade Organization panel ruled Tuesday that the European Union continues to provide illegal subsidies to plane-maker Airbus, the latest in a string of tussles between the European manufacturer and US rival Boeing.

In a statement issued Tuesday, Boeing said Airbus provided more than $22 billion in illegal subsidies, and until its European rival addresses those damages, "it is anticipated that USA tariffs will be authorized up to the amount of annual harm this market-distorting tactic is causing".

The WTO ruled that Airbus had failed to mitigate the damage to Boeing from illegal subsidies used to develop the Airbus A380 and A350 jets, according to media reports.

The shares of Airbus had fallen shortly after the WTO issued its findings and were poised to close down around 0.86 percent.

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Boeing's take on the remaining case is that a decision is due late this year or early next and the company believes the ruling against it at a previous hearing will be reversed.

Boeing said it anticipated that U.S. tariffs up to the amount of harm from the subsidies could be scheduled as early as 2019. It said it would comply swiftly on the rest.

"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. It is under appeal and should be decided later this year or in early 2019.

The appellate body maintained a ruling by the WTO's compliance panel that European Union "launch aid" provided to Airbus resulted in lost sales for Boeing in the twin-aisle and very-large aircraft markets.

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The WTO case has yielded 5,000 pages of filings and cost tens of millions of dollars. The decision means the USA can now ask an arbitrator to determine how much it can retaliate against the European bloc for failing to comply - raising a new question about how much Washington may recover from the EU through retaliatory tariffs.

Airbus disputes those numbers, saying they overstate the amount of support embedded in the contested loans.

Both companies have cut output of four-engined A380s and 747s due to airlines' preference for smaller models and Boeing has long said the industry's behemoths have had their day.

"The result is simple: Airbus pays back its loans, Boeing pays back nothing and continues to exploit the generosity of the US taxpayer", he said. For a claim to stick at the WTO, subsidies must be found not just to exist but to have caused real harm.

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The WTO found that the European Union didn't stop giving Airbus subsidies to build its A380 and A350 widebody jets, despite saying it ended the financing in 2011. "It shatters Boeing's claim it perpetuated for years that their WTO case undermines European industrial-government partnership".

WTO Opens Door For US Retaliation In Airbus Subsidy Saga