Trade War Airbus subsidies deemed illegal by WTO, landing a win for Boeing

Airbus and Boeing are fighting it out at the WTO. The trade organization agreed the EU wrongly subsidized Airbus' jetliners but has yet to weigh in whether Boeing also received illegal help.
I get by with a little help from my friends.

Boeing and the US won a victory on Tuesday as the World Trade Organization upheld a 2016 ruling that the European Union had not stopped illegal subsidies to Airbus. But it was just a battle, not the war.

The WTO found that the EU failed to eliminate billions in illegal subsidies to Airbus for the launch of its A380 superjumbo and A350 widebody airliner, paving the way for the US to impose retaliatory tariffs. But countercharges from Airbus regarding alleged illegal tax subsidies to Boeing from the state of Washington are still winding their way through the ponderous WTO litigation process.

Nonetheless, the ruling against the French-German airplane consortium comes at an awkward time for the EU as it inveighs against the US administration for flouting WTO rules with its threat to unilaterally impose tariffs on aluminum and steel. It is bound to fuel the growing trade fracas between the two allies.

The WTO still needs to assess the damage done to Boeing in a separate procedure that will set the amount for US retaliation. That will take months. In the meantime, US President Donald Trump can use the ruling as leverage in his efforts to reduce what he claims are other unfair trade practices on the part of the EU. But the pending appeal on Boeing subsidies could provide the EU with a counterweight.

This report confirms once and for all that the EU has long ignored WTO rules. Robert Lighthizer, US trade representative

US Trade Representative Robert Lighthizer was quick to crow about the victory. “This report confirms once and for all that the EU has long ignored WTO rules, and even worse, EU aircraft subsidies have cost American aerospace companies tens of billions of dollars in lost revenue,” he said in a statement. “It is long past time for the EU to end these subsidies.”

In his telling, the WTO ruling justifies Mr. Trump’s hard line on trade. Unless the EU finally takes action to stop breaking the rules and harming US interests, the United States will have to move forward with countermeasures on EU products, he added.

The European Commission, for its part, noted that the bulk of the US subsidy claims, amounting to $22 billion in total, had been rejected by the WTO because those subsidies expired in 2011. What remains to bring the EU in compliance are certain subsidies to the A380 and the widebody version of the A350. “The EU will now take swift action to bring itself into line with WTO rules as regards its remaining obligations,” the commission said in a statement.

The commission also noted that Boeing’s claims for lost sales as a result of the subsidies were also largely rejected in the WTO report. Only 14 of 218 specific “adverse effects” were upheld in the appellate review.

As a final shot, Cecilia Malmström, the European commissioner for trade, said: “We look forward to the upcoming ruling by the appellate body on US compliance with the WTO findings of the massive and persistent government support to Boeing.”

Darrell Delamaide is a writer and editor for Handelsblatt Global in Washington, DC. To contact the author: [email protected].