Airbus’s adjustment of A350 launch aid contracts is intended to bring an early end to a transatlantic subsidies dispute which is otherwise set to drag on for several months as a consequence of delays to World Trade Organization decisions.
The WTO’s appeals process has been crippled since last December by an impasse in the selection procedure for new Appellate Body members.
Airbus is waiting to hear the verdict of a WTO appeal, filed in December, regarding its efforts to address UK and German subsidies for the A350 programme, as well as French, German, UK and Spanish subsidies for the A380.
It is also awaiting a decision on the European Union’s counter-case against Boeing subsidies, which would enable the EU to inflict tariffs on US imports.
The US government has already imposed its own tariffs on $7.5 billion worth of products from Airbus and other European industries, and the WTO delays mean that these are set to have an impact for several more months before the EU can retaliate.
Airbus has taken the step of adjusting the French and Spanish A350 launch aid contracts, raising the interest rates on loan agreements and amending other details, to indicate its willingness to end the dispute – particularly given that European businesses are suffering from the effects of the coronavirus crisis, and US tariffs are simply causing further damage.
While the airframer is not discussing the details of the WTO measures, a source familiar with the case says that the EU had been expecting authorisation for counter-tariffs in May-June but this is likely to be pushed back to September-October.
The upshot is that European industries have “nothing to counter”, the source says, and might have to cope with US tariffs for up to five months longer than anticipated.
While the EU side has been bullish over the probable size and extent of the counter-authorisation, and expects its eventual confirmation, the timing has become an issue of concern.
“We can’t just sit around waiting for the October timeframe,” the source adds, suggesting that Airbus’s decision to adjust the A350 contracts is not “backtracking” but rather an “olive branch” to show the airframer is “serious” about putting an end to the dispute. “It has to end now.”
While the dispute has spanned three US presidencies, its escalation by the sometimes-erratic Trump administration – combined with the economic crisis and the WTO situation – has put substantial pressure on the EU.
The US Trade Representative has added to this pressure with a formal consultation in June to review the list of products subject to tariffs, and explore whether the tariff level should be raised – asking whether the figure, in some cases, ought to be as much as 100%.
Although the EU and several countries have established a temporary contingency forum to hear appeals and resolve trade disputes, the USA is not among the members.
Airbus’s outstanding appeals to the WTO centre on its measures to repay UK A350 launch aid and amend German A350 loans, as well as restructure loans for the A380 from France, Germany, Spain and the UK. The airframer is confident that it has a case for appeal, and believes it has previously performed better at the appeal stage than during main WTO panel hearings.
But both the appeal and the separate EU countermeasures authorisation remain in limbo.
European trade commissioner Phil Hogan says the Airbus decision to revise the French and Spanish A350 contracts removes any grounds for the US to maintain its tariffs on EU exports.
“Unjustified tariffs on European products are not acceptable,” he says. “We insist that the USA lifts these unjustified tariffs immediately.”
Hogan adds that the EU has made specific proposals to reach a negotiated settlement.
“In the absence of a settlement, the EU will be ready to fully avail itself of its own sanction rights,” he warns. “The WTO will soon issue its arbitration decision in the parallel case of the EU against the USA on certain unlawful subsidies to Boeing.”