EU Failed to Cut Off Illegal Subsidies to Airbus, WTO Rules -- Update
September 22 2016 - 12:19PM
Dow Jones News
By Robert Wall and Doug Cameron
The World Trade Organization on Thursday said the European Union
had failed to eliminate illegal subsidies to Airbus Group SE in a
multibillion-dollar trade dispute with the U.S.
The 574-page verdict is the latest in the long-running
trans-Atlantic battle over state aid that governments have granted
to Airbus, the world's No. 2 plane maker, and its larger rival,
Boeing Co.
The WTO said the EU and some of its member states "failed to
comply" with an earlier ruling to remove the subsidies or void
their effect. Measures the EU took to comply with an earlier
finding were deemed insufficient.
The WTO in a future ruling is expected to find the U.S.
similarly didn't sufficiently address concerns about subsidies
benefiting Boeing Co., people familiar with the process said.
The Geneva-based trade adjudicator also said that Airbus
received subsidies for its new A350XWB long-range plane, though it
rejected the U.S. claim these were "prohibited subsidies" that have
to be remedied expeditiously.
The WTO hadn't previously passed judgment on A350 support
because the program in its current form was launched only after the
U.S. initially raised its subsidy concerns with the trade body in
2004. Airbus only formally began the A350XWB program in 2006 to
challenge rival Boeing's 787 Dreamliner.
U.S. Trade Representative Michael Froman called the ruling "a
sweeping victory" and urged the EU to halt subsidies to Airbus
"immediately."
An Airbus spokesman said the U.S. was mischaracterizing the WTO
findings. The WTO panel "recognizes that, not only is the Airbus
instrument totally legal, but terms of A350 agreements are very
close to perfect with only tiny tweaks required," he said.
The U.S. has signaled it could seek to impose at least $7
billion in retaliatory tariffs.
The European Commission, the EU's executive arm, defended its
actions. "An important win for the EU is that the panel rejected
new U.S. claims that repayable support for the airbus models
A350XWB and A380 are 'prohibited subsidies,'" the Commission
said.
Plane subsidies are becoming an increasingly hot topic. Canadian
plane maker Bombardier Inc. got a capital injection from the Quebec
government in exchange for a stake in the CSeries single-aisle
program. The move has been criticized by rival plane makers.
China and Russia also are developing new single-aisle planes,
raising concern that they will aim to sell them with significant
government backing.
Boeing Chief Executive Officer Dennis A. Muilenburg called the
latest WTO ruling "a victory for fair trade world-wide and for U.S.
aerospace workers, in particular."
The Airbus spokesman said Boeing "remains in denial that
billions of grants for the 787 and 777 have been declared
completely illegal by the WTO."
At stake are potentially billions of dollars in tariffs the U.S.
and EU could be allowed to impose on each other unless the WTO's
subsidy concerns are addressed. Those tariffs, which haven't yet
been set and don't have to be imposed by the winning side, could be
applied to trade involving products or services other than planes
or their components.
Before fines are imposed, the EU can appeal the latest finding
in a process that is likely to take at least three months.
The commission signaled it may appeal. "There are certain
findings of the panel that we consider to be unsatisfactory," it
said.
Trade experts believe the WTO plane subsidy dispute between the
U.S. and EU could drag on for years.
Mr. Froman said the subsidies the EU, Germany, France, the U.K.
and Spain had provided to Airbus "have cost American companies tens
of billions of dollars in lost revenue." The U.S. said subsidized
financing to Airbus amounted to almost $22 billion.
The U.S. raised its initial objection in the Airbus case in
2004, alleging that EU member states gave illegal subsidies to the
Toulouse, France-based aircraft maker. The EU quickly launched a
similar case against the U.S., arguing that the U.S. illegally
subsidized Boeing.
The two sides settled a previous dispute over subsidies in 1992,
but the U.S. walked away from that deal in 2004, arguing Airbus had
an unfair advantage. Efforts to return to the negotiating table
have failed.
The WTO also is expected to rule in the coming months on a
further challenge the EU filed against subsidies it alleges Boeing
has received for the 777X, the U.S. manufacturer's newest long-haul
plane. The EU first raised the issue with the WTO in late 2014. The
case is moving more quickly because its scope is narrower than that
of the earlier two cases. In it, the EU is challenging tax breaks
Boeing has received linked to the new long-haul plane launched in
November 2013.
Write to Robert Wall at robert.wall@wsj.com and Doug Cameron at
doug.cameron@wsj.com
(END) Dow Jones Newswires
September 22, 2016 12:04 ET (16:04 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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