WTO ruling on Airbus paves way for US sanctions on EU

[NED funded]

In the case that seems to never end, the US gets a big victory.

https://www.ft.com/content/dda5ba7a-...7-f6677d2e1ce8

The US has won the right to impose billions in punitive tariffs on EU imports after the World Trade Organization handed Washington a victory in the first of two crucial decisions that could finally end a 14-year battle over illegal subsidies to Boeing and Airbus.

The ruling clears the way for what could be the largest retaliatory action in WTO history. It also risks exacerbating growing trade tensions between the EU and US over a range of issues, from threatened US steel tariffs to Washington’s pledge to crack down on European companies doing business in Iran following Donald Trump’s withdrawal last week from a 2015 nuclear accord.

The WTO’s appeals body on Tuesday upheld a 2016 ruling that the EU has failed to eliminate billions in illegal aid to Airbus on two aircraft — the A380 superjumbo and the A350 twin aisle jet. The European Commission said it would take “swift action” to ensure it was in line with the WTO findings.

Boeing, which argued that unlawful aid to these two programmes comes to $9bn of its original alleged $22bn in illegal support, welcomed the ruling as vindication of its claims that European governments have for decades illegally subsidised the rise of its biggest rival through cheap loans for the launch of new aircraft.

“Today’s final ruling sends a clear message: disregard for the rules and illegal subsidies are not tolerated. The commercial success of products and services should be driven by their merits and not by market-distorting actions,” said Dennis Muilenburg, Boeing’s chief executive.

The Trump administration called the decision an important victory.

“President Trump has been clear that we will use every available tool to ensure free and fair trade benefits American workers,” said Robert Lighthizer, the US trade representative. “EU aircraft subsidies have cost American aerospace companies tens of billions of dollars in lost revenue . . . 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.”

However, the European Commission also claimed victory as the WTO rejected 204 of the total 218 claims put forward by the US.

“Today the WTO . . . has definitively rejected the US challenge on the bulk of EU support to Airbus, and agreed that the EU has largely complied with its original findings,” said Cecilia Malmstrom, EU trade commissioner. “Significantly, it dismissed the vast majority of the US claims that this support had damaged Boeing’s aircraft sales.”

Tuesday’s finding is the end of the first stage in a battle that erupted in 2004. The exact amount of allowed US retaliation will be determined by a separate process that could take months.

The WTO’s appellate body will also rule in the coming months on whether the US has complied with an order in 2012 to address its own illegal subsidies to Boeing through Washington state tax breaks.

A ruling in favour of the EU — which claims Boeing has enjoyed more than $20bn in illegal aid — would allow Brussels to impose its own punitive tariffs on US goods under WTO rules.

The row between Boeing and Airbus is one of the most contentious battles in the global trade system. The dispute reached a head in 2010 and 2011 when the WTO ruled that both Boeing and Airbus had collected billions in unlawful assistance.

Trade lawyers and other experts said Tuesday’s ruling was a mixed bag and appeared likely to reduce the size of any potential US retaliation, which would still have to be determined in a complicated process.

But Chad Bown, an expert on WTO disputes at the Peterson Institute for International Economics, said the retaliation was still likely to be the largest ever authorised by the global trade referee and could help the Trump administration increase pressure on the EU to make other trade concessions.

One potential way to do that, Mr Bown said, would be by using the WTO ruling as justification to raise tariffs on cars imported from Europe, which President Trump has repeatedly complained face lower tariffs in the US than American cars exported to the EU. “The Trump administration has showed that it likes to use tariffs as leverage and hold it over US trading partners,” he said. “This could help them do that.”

Before it can impose tariffs, the US will have to request an estimate of damages from a WTO arbitration panel. Boeing has argued that it lost billions in sales to Asia, the Middle East and Europe as a result of the subsidised launch of the A350 and A380. Deciding the level of countermeasures could take several months or up to more than a year, according to lawyers involved on both sides.

Boeing said tariffs totalling billions could come as early as next year. Nevertheless, Airbus insisted that any penalties imposed by the US were likely to be minor, as the outstanding compliance issues on the A350 and A380 were not significant and were being addressed. The issue was not the total amount of the loans from its four founder countries — France, Germany, the UK and Spain — but the interest rate that had been charged, said one person close to the subject.

Tom Enders, Airbus chief executive, said Boeing would struggle to convince the arbitration panel of significant damage from the outstanding issues. “Despite Boeing’s rhetoric, it is clear that their position today is straightforward healthy: they have half the market and a full order book, they have clearly not been damaged by Airbus repayable loans.”

[Wyrt]

Let's sanction out allies and biggest trading partner. What could go wrong?

[Mayhem]

Let's sanction out allies and biggest trading partner. What could go wrong?

Meh, just invest some millions into Trump properties or something close to him and he'll praise the EU for subsidizing Airbus, you'll see.

[NED funded]

Let's sanction out allies and biggest trading partner. What could go wrong?

That's how it works dude. The US used the recognized channels to settle the issue, various EU countries did not comply with the ruling that came out of it and now the WTO ruled that given this is the case the US can sanction them. If the EU complied with the original ruling, the ruling of today would've been different and the US could not tariff the EU in a WTO consistent way.

[sarahtasher]

That means you are going to accept the sanctions against Boeing over Bombardier ?

[Mayhem]

That's how it works dude. The US used the recognized channels to settle the issue, various EU countries did not comply with the ruling that came out of it and now the WTO ruled that given this is the case the US can sanction them. If the EU complied with the original ruling, the ruling of today would've been different and the US could not tariff the EU in a WTO consistent way.

The US can't tariff the EU in a WTO consistent way right now as they have to assert the supposed damage first.

[sarahtasher]

I also love the play pretend that Airbus subventions count as unfair, but not the ginormous contracts of the DOD for Boeing. As ''shame'' is a verboten word for American defence contractors, it's really rich to see Boeing crying for a 1 billion loan when they get 20 billions of government contracts per year.

[NED funded]

I also love the play pretend that Airbus subventions count as unfair, but not the ginormous contracts of the DOD for Boeing. As ''shame'' is a verboten word for American defence contractors, it's really rich to see Boeing crying for a 1 billion loan when they get 20 billions of government contracts per year.

Government contracts are supposed to be bad???

[Sorshen]

How is this a win?

[Skroe]

Anyone who has followed at all the largely failed A380 program is largely aware of this. Airbus made a jetliner that should have first flown 30 years ago, in an entirely different market. An albratross if there ever was one. I mean the market has changed so much, that the 747 is nearing its end (in favor of advanced two engined 777s). The A380 is the answer to a question asked too long ago to remember. Basically, it needs to be eliminated, as does the many thousands of jobs it supporters. It is absolutely an illegal subsidy.

The A350 is a different matter. That's somewhat surprising. It is certainly Airbus' patch job for the A380's failure, and designed to compete with the 787 and 777. From that angle, they are connected.

- - - Updated - - -

I also love the play pretend that Airbus subventions count as unfair, but not the ginormous contracts of the DOD for Boeing. As ''shame'' is a verboten word for American defence contractors, it's really rich to see Boeing crying for a 1 billion loan when they get 20 billions of government contracts per year.

Military contracts aren't subsidies. They are contacts. They're fundamentally different.

In fact, you would have a much stronger case if the Pentagon actually bought second hand or new 737s and 757s to replace the countless 1960s-era jetliners still in service in critical roles, like the 707-based E-3 Sentry, E-6 Mercury and E-8 JSTARS. But no, the Pentagon doesn't do that, despite the fact that Boeing offers export-variants of all three platforms, but based on 737 and 757 aircraft bodeis and not 707.

In fact, one of the most successful military programs in recent years is the P-8 Poseidon, a militarized 737-800. But it's not any kind of commercial off the shelf 737. It's an unprecedented hybrid... a mish-mash of different 737 variants, with 767-400ER raked wingtips. It's a great aircraft, but exactly what you'd expect out of a military contract... not an illegal subsidy.

In fact, let's consider the state of Boeing military aviation. They don't build any fighters for the US Air Force. They build the F/A-18 for the US Navy, but that's not in high rate production. They lost the bomber bid for the B-21. The KC-46 Pegasus tanker program is a complete disaster the Pentagon is about to take Boeing to court over. Boeing has the most advanced military drones, but they are almost all small-procurement programs or test programs... the most numerous drones are non-Boeing. The Air Force is looking to replace many of those 707 Aircraft with either drones, Gulfstream aircraft, or distributing them over many platforms (miniturization of electronics has made large aircraft uneconomical for some of those missions).

This leaves Boeing largely with support for things the military has already bought, and subcontractor status.

So where exactly are these illegal subsidies? Frankly, this is one of the things I was glad I was wrong about in retrospect. A decade ago, I didn't understand why the USAF canceled replacing 707-replacement platforms with 737 and 757 successors. Now I'm glad they did. They'd be useless in contested airspace, and Boeing just don't do stealth like Northrop and Lockheed does.

Hell, perhaps the most needed program beyond 2025 is going to be a Stealthy tanker aircraft. Boeing has no solution for that.

[Trifle]

That's how it works dude. The US used the recognized channels to settle the issue, various EU countries did not comply with the ruling that came out of it and now the WTO ruled that given this is the case the US can sanction them. If the EU complied with the original ruling, the ruling of today would've been different and the US could not tariff the EU in a WTO consistent way.

If you actually read the article, you'll find that the EU did actually mostly comply (most of the charges were rejected), and the illegal aid Boeing received appears to be similar in scale to the illegal aid Airbus received so once all the final rulings are in they might end up just cancelling each other out.

[Gaaz]

I fail to see any major win here.
1. This case is far from over. 204 out of 218 claims were rejected. Counter claim by Airbus is still pending
2. Main issue is loan interest rates. We are talking 50 (ish) million difference per 1 billion loan advantage, even if we assume 0 interest rate for Airbus. I really doubt that the amount of subsidies surpassed even 0.5 billion since 2011 ruling.
3. Due to the above, any tariff sanctions are going to be very minor in the worst case scenario for the EU, or even completely reversed (as to sanction US in favor of the EU) in the worst case scenario for the US, depending on the outcome of the Boeing trial.

[Machismo]

More attempts to fight against free trade... no surprise the OP is pushing it... what a shame.

[I Push Buttons]

More attempts to fight against free trade... no surprise the OP is pushing it... what a shame.

Lol what?

What the EU was doing was against free trade... Do you even know what a non-tariff barrier to trade is?

Free trade would be company A in one country and company B in another country making their products and freely competing against each other in both countries.

What the EU did was subsidize company B's R&D/production through low-interest loans, to make their own domestically produced products cheaper than company A's product, and thus out-compete them. That isn't free trade.

[Machismo]

Lol what?

What the EU was doing was against free trade... Do you even know what a non-tariff barrier to trade is?

Free trade would be company A in one country and company B in another country making their products and freely competing against each other in both countries.

What the EU did was subsidize company B's R&D/production through low-interest loans, to make their own domestically produced products cheaper than company A's product, and thus out-compete them. That isn't free trade.

And what the United States is doing is also against free trade... both are in the wrong. I oppose subsidies, just like I oppose tariffs.

As for low-interest loans... that's what the Fed is good for... I say we get rid of it, as well. We have been building up protectionism in this country, and it's a fucking travesty.

[NED funded]

And what the United States is doing is also against free trade... both are in the wrong. I oppose subsidies, just like I oppose tariffs.

Uh?? The US used the proper channels to make the EU change its protectionist behavior, various EU countries refused to comply multiple times throughout the span of 14 years, the tariffs are a last resort the WTO uses when countries continue their bad behavior. The EU is the one acting against free trade principles.

[Machismo]

Uh?? The US used the proper channels to make the EU change its protectionist behavior, various EU countries refused to comply multiple times throughout the span of 14 years, the tariffs area a last resort the WTO uses when countries continue their bad behavior. The EU is the one acting against free trade principles.

But why is the Untied States pushing such protectionist behavior? It seems like everyone wants to oppose the free markets these days. The United States has gotten objectively worse in that regard.

Tariffs go against free trade. This administration seems to love the hell out of tariffs.

[Voidwielder]

Military contracts aren't subsidies. They are contacts. They're fundamentally different.

I suppose same holds true for SpaceX subsidies?

[Deleted]

Further proof that the WTO is biased.

They favour the US in a majority of cases all the time and ignore the fact that Boeing is being subzidized by the US Government.

https://subsidytracker.goodjobsfirst.org/parent/boeing

Atleast this time they tried to pretending to be neutral by saying the majority of claims were false.