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U.S. Threatens Sanctions Against EU in Long-Running Aircraft Subsidy Dispute

Thursday, May 17, 2018
Sandler, Travis & Rosenberg Trade Report

The Trump administration said May 15 it “will have to move forward with countermeasures” on European Union products if the EU does not end subsidies to large aircraft manufacturer Airbus.

According to a statement from the Office of the U.S. Trade Representative, in December 2011 the EU claimed to have removed the more than $18 billion in subsidized financing to Airbus that the World Trade Organization had found to be WTO-inconsistent. However, in September 2016 a WTO compliance panel found that the EU had not removed those subsidies and further violated WTO rules by granting additional subsidized financing.

USTR said a May 15 report from the WTO Appellate Body confirmed that “billions of dollars in launch aid to the [Airbus] A350 XWB is causing significant lost sales of Boeing 787 aircraft” and that “subsidies to the [Airbus] A380 continue to cause significant lost sales of Boeing 747 aircraft, as well as impedance of exports of Boeing very large aircraft to the EU, Australia, China, Korea, Singapore, and UAE markets.” An statement from the EU appeared to agree, stating that the report “leaves the EU with only a few remaining compliance obligations … linked to repayable loans provided to the newer A380 and A350 XWB models” to bring itself fully into line with WTO rules, which the EU “will now take swift action” to accomplish.

According to the EU, the Appellate Body also ruled that the EU “is not required to take any further action regarding state support that no longer exists” and “significantly downgraded the assessment of the economic damage that the remaining EU support has allegedly caused to Boeing's aircraft sales.” The U.S. has previously sought WTO authorization to retaliate against $7-10 billion worth of EU goods a year (via tariff increases or other measures), but the Appellate Body’s ruling could lower the amount of any retaliatory sanctions the WTO may ultimately authorize.

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