Ruling on Airbus Subsidies Could Escalate Trade Tensions With Europe

Ruling on Airbus Subsidies Could Escalate Trade Tensions With Europe

Ruling on Airbus Subsidies Could Escalate Trade Tensions With Europe

The decision clears the way for the United States to levy billions in tariffs on European Union products over the harm done to Boeing over subsidies provided to Airbus used to launch its A380 and A350 jets.

In a statement issued Tuesday, Boeing said Airbus provided more than $22 billion in illegal subsidies, and until its European rival addresses those damages, "it is anticipated that USA tariffs will be authorized up to the amount of annual harm this market-distorting tactic is causing".

Tuesday's finding wraps up a case against the EU dating back to 2004 and means the US can now seek WTO backing to impose sanctions on an as yet unspecified list of European goods.

The report comes at a time of mounting trade tensions over USA aluminum and steel tariffs and the impact on European firms of Washington's decision to exit the Iran nuclear pact.

Boeing may lose upward of $20 billion in aircraft sales because of the US withdrawal from the nuclear pact.

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"Today's report is really only half the story", Airbus CEO Tom Enders says, as the WTO is expected to issue a ruling in the coming months on an European Union case against the US over subsidies provided to Boeing, which could rebalance today's outcome.

"The commercial success of products and services should be driven by their merits and not by market-distorting actions". Boeing claims that the EU provided the European aerospace giant more than $22 billion in illegal subsidies.

The tariffs won't likely to be imposed on planes, he said.

It said in a statement that, "This is expected to be the largest-ever WTO authorization of retaliatory tariffs".

The size of U.S. tariffs to be allowed will be determined through a WTO arbitration process, and will be based on the annual harm to U.S. and Boeing - losses that the U.S. had previously pegged as ranging from US$7 billion to US$10 billion a year.

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To Airbus' point, one finding against the USA now remains before the WTO, which concerns a Washington state tax measure.

Airbus shares closed down 0.9 percent.

The EU has brought two such cases against the U.S. One case ended in favor of the U.S., and in the other, like in the Airbus case, the majority of the allegations the EU made against the U.S. and Boeing were dismissed.

The EU will now take "swift action to ensure it is fully in line with the WTO's final decision in this case", she said.

Airbus shares fell by 0.85 per cent after the WTO ruling while at the time of writing Boeing shares had climbed by almost two per cent. "That ends today", he said.

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Airbus now has a case pending at the WTO accusing the United States of providing illegal support for Boeing.

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