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'EU paid Airbus $18bn in illegal subsidies'

16 May 2018

A WTO appellate body found that the European Union and four of its member countries - the United Kingdom, France, Germany and Spain - didn't comply with prior rulings over subsidies, which gave Airbus an unfair advantage on the world market and hurt USA -based Boeing.

This landmark ruling by the WTO Appellate Body is the final decision in this case, which was initiated in 2006.

Deciding on a case first opened in 2004, the appellate body found Airbus paid a lower interest rate on financing to develop the A350XWB aircraft than it would have gotten in the open market.

But the WTO also dismissed USA claims that loans for the A320 and A330, the most popular Airbus models, were also costing Boeing significant sales, thus narrowing the scope of the ruling.

"Today's final ruling sends a clear message: Disregard for the rules and illegal subsidies is not tolerated", Boeing CEO Dennis Muilenburg, said in a statement.

"The commercial success of products and services should be driven by their merits and not by market-distorting actions".

The next stage of the 14-year battle will be over the size of the tariffs the USA will be allowed to impose to compensate for lost exports.

The ruling centres on actions taken by the European Union generally, as well as four of its member states: Britain, France, Germany and Spain. The bloc compounded the issue with below-market loans for the planemaker's marquee A350 jetliner.

The decision by the WTO's appellate body comes as the Trump administration has exerted intense pressure on the Geneva-based organization over what the president alleges is its "unfair" treatment of the U.S.

He added, "Despite Boeing's rhetoric, it is clear that their position today is straightforward healthy: They have half the market and a full order book, they have clearly not been damaged by Airbus repayable loans".

Shares of Airbus reversed earlier gains to trade down as much as 1.8 percent immediately after the ruling was published. Boeing fell less than 1 percent to $342.10 at 11:43 NY.

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

It has been predicted that the tarrifa of Boeing could reach billions of dollars a year starting as early as 2019.

'EU paid Airbus $18bn in illegal subsidies'