Financail Times - US and EU both claim victory in Boeing-Airbus state aid dispute

Financail Times - US and EU both claim victory in Boeing-Airbus state aid dispute

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June 9, 2017. Shawn Donnan, Peggy Hollinger, Arthur Beesley.

Appeals could delay resolution of multibillion dollar WTO battle for at least a year.

The US and EU have both claimed victory in a 13-year World Trade Organisation battle over illegal state aid to Boeing and Airbus. But appeals could delay final resolution of the multibillion dollar dispute for at least another year.

The WTO’s compliance panel on Friday rejected several EU claims that the US had failed to withdraw all illegal subsidies to Boeing. However, it also found that the US had not complied with a previous ruling to abolish illegal tax breaks by Washington state. 

Officials on both sides of the Atlantic and Boeing and Airbus executives are aware that their battle over state aid has distracted them from fighting off new competitors in China and Russia, which are hoping to break the duopoly that dominates the global commercial aircraft market.

At a time of growing tensions over trade between Donald Trump’s administration and the EU, both groups have also said privately that a settlement should be reached in the protracted dispute. But both sides have refused to budge from their entrenched positions.

Both sides are likely to appeal against parts of Friday’s ruling. That would take the EU case to the WTO’s appellate body, which is already considering a separate US case over state aid to Airbus

The US hailed the WTO’s finding that all but one of the 29 tax incentives and other subsidies identified by the EU were in compliance with global trade rules.

US officials added that they planned to appeal against the WTO’s finding that there was one illegal subsidy — a Washington state package of tax breaks. But they said it amounted to only a small portion of the roughly $100m a year provided by the state, out of more than $10bn in alleged subsidies. 

“The WTO report confirms what we have always said: the US does not provide subsidies even remotely comparable to the uniquely large and uniquely harmful EU subsidies to Airbus,” said Robert Lighthizer, the US Trade Representative.

“It is time for the EU to stop making excuses and instead to join us in negotiating a settlement to remove all WTO-inconsistent subsidies so that our world-class aircraft manufacturers can compete on a level playing field.” 

But the EU seized on the WTO’s finding that the US had failed to comply with a previous ruling as well as its identification of other subsidies. 

Cecilia Malmström, EU trade commissioner, called the ruling “another victory for the EU, its industry and EU workers in this strategic sector”. 

“The panel agrees that the US has simply ignored existing WTO rulings and has continued to subsidise Boeing,” she said, adding that Brussels would continue to “firmly defend our industry”.

The European Commission said that its lawyers were considering an appeal. 

Airbus said that the US’s failure to withdraw tax breaks as well as benefits that Boeing extracted from research and development by Nasa and the department of defence had cost it the sale of some 300 aircraft in the past five years at an estimated value of $15bn to $20bn.

Overall, Airbus said that illegal state support for Boeing had cost it sales worth roughly $100bn over time. 

Tom Enders, Airbus chief executive, described the WTO ruling as a “great victory for fair trade” but Boeing said it was a “resounding defeat” for the European group and the EU.

The US group blamed illegal subsidies for Airbus’s A320 and A380 wide-body jets for its loss of billions of dollars in sales.

“It is finally time for them to comply with their global trade obligations and eliminate and remedy the $22bn of launch aid and other illegal subsidies that are harming US aerospace companies and American workers,” said J. Michael Luttig, Boeing’s general counsel.

Friday’s WTO ruling coincided with a decision by the US International Trade Commission to proceed with an anti-dumping case filed by Boeing against Canada’s Bombardier.

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