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American ShipperShipping

U.S.-EU aircraft dogfight ending?

The World Trade Organization on Tuesday said the EU and Airbus must continue taking steps to end remaining subsidies for aircraft manufacturing.

   A nearly 12-year dogfight between the United States and the European Union over alleged government subsidies for their respective aircraft manufacturing giants — Boeing and Airbus — took another step closer to resolution on Tuesday when the World Trade Organization said the EU must end certain ongoing financial support for building Airbus’ biggest passenger planes. 
   The Trump administration called the WTO Appellate Body’s action “an important victory” in the dispute, which was initiated before the global trade body in 2006. In May 2011, the appellate body confirmed that the EU and four member states — Germany, France, the United Kingdom and Spain — conferred more than $18 billion in subsidized financing to Airbus that allegedly caused Boeing to lose sales of more than 300 aircraft and market share throughout the world.  
   In December 2011, the EU claimed to have removed those WTO-inconsistent subsidies for Airbus. The United States, however, disagreed and in September 2016, a WTO compliance panel found that the EU had failed to comply, pointing out that only two of the 36 “steps” the EU claimed to have taken were completed.
   “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,” said U.S. Trade Representative Robert Lighthizer. 
   “Unless the EU finally takes action to stop breaking the rules and harming U.S. interests, the United States will have to move forward with countermeasures on EU products,” he added.
   Specifically, the latest WTO appellate report found that EU subsidies for large twin-aisle aircraft, namely the Airbus A380, have caused “serious prejudice” to U.S. interests, particularly in regard to Boeing’s 787 aircraft export sales, the Office of the U.S. Trade Representative (USTR) said. 
   “The commercial success of products and services should be driven by their merits and not by market-distorting actions,” said Dennis Muilenburg, Boeing chairman, president and CEO, in a statement. “Now that the WTO has issued its final ruling, it is incumbent upon all parties to fully comply as such actions will ultimately produce the best outcomes for our customers and the mutual health of our industry.”
   The EU and Airbus long have countered that Boeing received its own share of government subsidies to support its large passenger aircraft programs. A WTO compliance panel found that a Washington state tax measure to support Boeing’s 787 plane production was inconsistent with WTO rules, which the United States appealed. Airbus claimed that the Washington state tax benefits have caused it to lose $16 billion in sales. The WTO is expected to decide on this matter before the end of the year. 
   “Of course, today’s report is really only half the story. The other half coming out later this year will rule strongly on Boeing’s subsidies and we’ll see then where the balance lies,” said Airbus CEO Tom Enders in a statement on Tuesday.
   “The result is simple: Airbus pays back its loans, Boeing pays back nothing and continues to exploit the generosity of the U.S. taxpayer,” Enders said. “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.”

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Chris Gillis

Located in the Washington, D.C. area, Chris Gillis primarily reports on regulatory and legislative topics that impact cross-border trade. He joined American Shipper in 1994, shortly after graduating from Mount St. Mary’s College in Emmitsburg, Md., with a degree in international business and economics.
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