Airbus-Boeing WTO dispute: What you need to know | Business| Economy and finance news from a German perspective | DW | 02.07.2019
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Airbus-Boeing WTO dispute: What you need to know

The spat is in focus with the WTO allowing the US to impose tariffs on billions of dollars worth of EU goods. DW takes a look at the nearly 15-year-old case that has seen the two allies duel over aircraft subsidies.

What is the dispute all about?

The European Union and the United States claim that each other's airplane manufacturer is unfairly subsidized.

It was the US which first filed a case with the World Trade Organization in 2006 claiming that Airbus, which is jointly owned by Germany, France, Spain and Britain's BAE Systems, had received $22 billion (€19.4 billion) in illegal subsidies. US officials estimated that the subsidies had resulted in an economic benefit of more than $200 billion.

The EU retaliated with a counter case, alleging that Boeing had received $23 billion in "trade-distorting" subsidies in the US mainly for its research and development projects. 

What has the WTO found?

Over the years, the WTO has ruled that both sides unfairly subsidized their aircraft makers.

Last year, the WTO's appeals body upheld a 2016 ruling that the EU had supported Airbus with subsidized loans for the development of new aircraft — the A380 superjumbo and the A350 twin-aisle jet. The world body also found that the loans which were repayable on delivery amounted to illegal assistance.

Earlier this year, the WTO handed the EU a victory in its counter case, saying America's favorable contract terms and tax breaks to Boeing had hurt Airbus sales. Interestingly, both the US and the EU claimed victory on hearing the decisions.

The WTO is yet to rule on the harm caused by the unlawful subsidies. That will determine the number of countermeasures the two sides can impose.

Ruling on the US sanctions request, the WTO has allowed the US to impose tariffs on up to $7.5 billion worth of EU goods, well below the US request. The US trade office had estimated the harm from the EU subsidies to Airbus at $11 billion in trade each year.

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How do EU and US plan to respond?

The US and the EU have threatened to impose billions of dollars of tit-for-tat tariffs.

The US has released a list of EU products worth $25 billion that could be hit with tariffs. The products include aircraft parts, olives, whiskey and wines.

The EU has prepared its own list of US products worth $20 billion for countermeasures. The list covers a range of items, from aircraft to chemicals and citrus fruit to ketchup. The EU estimates damages caused to Airbus by US support of Boeing at $12 billion. The WTO's decision on EU countermeasures is expected only after six months.

Can a truce be reached?

In June, Reuters reported that the US was open to negotiations on an "enforceable mechanism" that could allow Airbus to receive government funding on commercial terms and ease the risk of tit-for-tat sanctions.

Such a deal would include moves by the US to address tax breaks given to Boeing and make them compliant with trade rulings, as part of a possible new framework for aircraft industry funding, Reuters said, citing two sources.

US officials later blamed the EU for not showing any interest in talks to resolve the dispute.

Brussels, however, blames the US for spurning its calls for a settlement.

 

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