US proposes new tariffs on EU over Airbus subsidies

Washington: The United States on Monday (local time) proposed a list of tariffs on EU products, ranging from large commercial aircraft, motorcycles to various cheeses and wines and ski-suits in response to World Trade Organisation (WTO) rulings, which found that the European bloc had provided ‘illegal’ subsidies to Airbus.

In a statement, the Office of the US Trade Representative (USTR) said it began its process Section 301 of the Trade Act of 1974 to identify products of the EU to which additional duties may be applied until the EU removes those subsidies.

It said that WTO’s findings on EU’s subsidies to Airbus caused “adverse effects” to the US.

“USTR estimates the harm from the EU subsidies as $11 billion in trade each year. The amount is subject to arbitration at the WTO, the result of which is expected to be issued this summer,” the statement said.

Commenting on the matter, US Trade Representative Robert Lighthizer said, “This case has been in litigation for 14 years, and the time has come for action. The Administration is preparing to respond immediately when the WTO issues its finding on the value of U.S. countermeasures.”

“Our ultimate goal is to reach an agreement with the EU to end all WTO-inconsistent subsidies to large civil aircraft. When the EU ends these harmful subsidies, the additional U.S. duties imposed in response can be lifted,” he added.

In line with the US law, the preliminary list contains a number of products in the civil aviation sector, including Airbus aircraft.

“Once the WTO arbitrator issues its report on the value of countermeasures, USTR will announce a final product list covering a level of trade commensurate with the adverse effects determined to exist,” the statement further said.
After many years of seeking unsuccessfully to convince the EU and four of its member states (France, Germany, Spain, and the United Kingdom) to cease their subsidisation of Airbus, the US brought a WTO challenge to EU subsidies in 2004.

In 2011, the WTO found that the EU provided Airbus USD 18 billion in subsidised financing from 1968 to 2006. In particular, the WTO found that European “launch aid” subsidies were instrumental in permitting Airbus to launch every model of its large civil aircraft, causing Boeing to lose sales of more than 300 aircraft and market share throughout the world.

In response, the EU removed two minor subsidies but left most of them unchanged. The EU also granted Airbus more than USD 5 billion in new subsidised “launch aid” financing for the A350 XWB.

The US requested the establishment of a compliance panel in March 2012 to address the EU’s failure to remove its old subsidies, as well as the new subsidies and their adverse effects. That process came to a close with the issuance of an appellate report in May 2018 finding that EU subsidies to high-value, twin-aisle aircraft have caused serious prejudice to US interests.

The report found that billions of dollars in launch aid to the A350 XWB and A380 cause significant lost sales to Boeing 787 and 747 aircraft, as well as lost market share for Boeing very large aircraft in the EU, Australia, China, Korea, Singapore, and the UAE.

Based on the appellate report, the US sought countermeasures worth USD 11.2 billion per year to be imposed, commensurate with the adverse effects caused by EU subsidies.

The EU challenged that estimate, and a WTO arbitrator is currently evaluating those claims.