A World Trade Organisation (WTO) arbitrator has said the USA can levy $7.5 billion worth of annual tariffs on European goods as compensation for European subsidies received by Airbus.
A report published 2 October by a WTO-appointed arbitrator harshly criticises the EU’s backing of Airbus and faults it for seeking to avoid consequences by drawing out the case over more than a decade.
The decision gives the US a green light to impose the annual tariffs until the EU brings its practices into compliance with WTO standards, the trade organisation tells FlightGlobal.
The EU is already seeking to prove compliance through a WTO compliance panel, which could issue a ruling before year end, WTO says.
However, that ruling could be appealed, further drawing out the dispute.
The arbitrator’s decision comes 14 years after the US filed a complaint with the WTO, alleging European countries unfairly subsidised Airbus commercial aircraft programmes.
A WTO panel ruled against Airbus 10 years ago, but the battle has churned on through appeals and arbitration.
The Office of the United States Trade Representative did not respond to a request for comment about how it intends to proceed.
The agency has published lists of products produced by France, Germany, Spain and the United Kingdom that could be subject to import duties.
Those products include aircraft weighing more than 15t and related fuselages and components, and helicopters. A range of consumer products could also be taxed.
“Europe is facing tariffs today because Airbus has refused for years to comply with WTO rulings,” Boeing says in a statement. “Airbus’s non-compliance will negatively impact European member states, industries and businesses completely unrelated to Airbus’s actions, as well as Airbus’s airline customers.”
“Even today, Airbus could still completely avoid these tariffs by coming into full compliance with its obligations. We hope it will finally do that,” Boeing adds.
AIRBUS CALLS FOR NEGOTIATION
In response to the ruling, Airbus urges a “negotiated solution,” warning tariffs would hinder free trade, elevate aircraft costs and negatively impact US jobs, airlines, air travelers and aircraft component suppliers.
Tariffs would “create insecurity and disruption not only to the aerospace industry but also to the broader global economy,” Airbus says in a media release.
The company has a large presence in the USA, including an A320 and A220 assembly site in Mobile. It says 40% of its aircraft-related procurement comes from US companies.
“Airbus is therefore hopeful that the US and the EU will agree to find a negotiated solution before creating serious damage to the aviation industry as well as to trade relations and the global economy,” says Airbus chief executive Guillaume Faury.
Airbus also says that within several months the WTO will rule on a separate EU-brought case alleging Boeing received unfair tax subsidies.
“The WTO will determine the amount of tariff countermeasures the EU can impose on US products – including imported Boeing aircraft,” Airbus says. “This will provide the EU with grounds to claim countermeasures on US products at a level that could exceed US sanctions.”
The arbitrator’s 2 October report came down hard on Airbus.
“Effective countermeasures are the last remaining hope to force the EU to reckon with the pernicious effects its [launch aid and member state financing] subsidies cause, and hopefully achieve a solution to this longstanding failure to comply with its WTO obligations,” says the report.
The EU provided “WTO-inconsistent” launch aid and funding to “every single” Airbus large commercial aircraft programme and caused “massive adverse effects to the United States,” it adds.
The arbitrator calls countermeasures the only option remaining for the USA after a 14-year flight. It also faults the EU for protracting the dispute “to evade the consequences of its WTO-inconsistent behavior”.”
“The EU has taken zero meaningful steps to address these subsidies or the effects they cause,” the arbitrator’s report says.