WTO approves US tariffs on $7.5 billion of EU goods in Airbus retaliation

In a festering trade dispute launched by Washington against government subsidies provided the Airbus, the Arbitration panel- Mr Faizullah Khilji; Mr Scott Gallacher; and Mr Thinus Jacobs- ruled that the US is entitled to slap retaliatory duties on the EU goods and services as Brussels failed to comply with WTO’s ruling on the various government subsidies provided by the EU governments to Airbus.

The panel said the amount of $ 7.5 billion is commensurate with the adverse effects suffered by Airbus' US rival Boeing in terms of lost sales and impeded deliveries of its aircraft due to launch aid/member state financing (LA/MSF) for large civil aircraft granted by France, Germany, Spain, and the United Kingdom.

It, however, disagreed with the US’ demand for imposing $ 10.56 billion annually in countermeasures. Surprisingly, the EU did not indicate any lower figure. Brussels repeatedly urged the the arbitrators to defer the ruling until the outcome of the second compliance panel issued its report on the US’ failure to implement the WTO ruling on the subsidies provided by American federal and state subsidies to the Boeing.

However, the arbitrators turned down the EU’s demand to delay the ruling saying it was neither legally necessary nor legally appropriate to await the outcome of the second compliance proceeding concerning the US’ failure to implement the WTO ruling against Boeing.

The panel ruled that, in the light of its mandate set out in Article 7.10 of the WTO's Agreement on Subsidies and Countervailing Measures (SCM Agreement), it determined the maximum level of countermeasures based on the value of the adverse effects during the December 2011-2013 reference period. The arbitrator chose not to quantify any adverse effects that may have arisen after the end of that time-period;

The adverse effects were determined in relation to five sales campaigns that Airbus won during the December 2011-2013 reference period and that Boeing would have won in the absence of LA/MSF subsidies, as found in the first compliance panel proceedings. These sales campaigns resulted in orders for 104 Airbus aircraft in the twin-aisle and Very Large Aircraft product market;

Since 2004, the US and the EU are locked in a tit-for-tat trade dispute over the subsidies provided to Airbus and Boeing respectively. After the EU’s Airbus captured a significant share of the world market for civil aircrafts in early 2000, the US launched a massive trade dispute against Airbus saying that the European company benefited largely because of launch aid/member state financing (LA/MSF) for large civil aircraft granted by France, Germany, Spain, and the United Kingdom.

The EU trade commissioner Cecilia Malmstrom said while the EU takes note of the decision of the World Trade Organization’s (WTO) arbitration panel in the Airbus case, and the level of possible countermeasures, it would be imprudent to apply countermeasures at this juncture. “Both the EU and the U.S. have been found at fault by the WTO dispute settlement system for continuing to provide certain unlawful subsidies to their aircraft manufacturers," she said.

At a time when the Boeing is under massive international criticism following two deadly crashes of the Boeing 737 Max 8 aircrafts, the WTO arbitration award is a blessing in disguise to deflect attention away from Boeing to Airbus, said analysts familiar with the ruling.

Effectively, all 737 Max 8 aircraft are now grounded the world over after the Ethiopian Airways crash on 10 March due to escalating safety fears. Boeing is fighting numerous legal cases by victims of the two crashes of 737 Max 8 aircraft in American courts.