US could increase tariffs after WTO rejects EU denials over Airbus subsidies

The US has said it may increase tariffs after the EU lost its case at the WTO. The US claimed that loans made by the EU to Airbus for the development of the A380 and other aircraft represented an unfair advantage.

The World Trade Organization (WTO) on Monday dismissed European Union suggestions that the bloc no longer subsidizes Airbus, the Europe-based multinational aerospace corporation.

As a responsive measure to the WTO’s conclusion, the United States said it could impose tariffs on a broader range of European goods, as it seeks to assert its authority in the long-lasting dispute between the world’s two principle constructors of airplanes — Airbus and Boeing.

US Trade Representative Robert Lighthizer said that the financial help the EU affords the European plane-maker does serious damage to the US aerospace industry.

In October of this year, the US imposed a record $7.5 billion (€6.8 billion) in levies on annual EU imports as part of its case against Airbus. The US placed partial tariffs on most jets from Airbus, as well as products such as cheese, olives and whiskey.

In Monday’s ruling, a three-person panel rejected EU claims that a recent decision by Airbus to stop producing the slow-selling A380 meant the airliner could no longer be seen as a threat to Boeing, the American multinational corporation whose competing 747 faces falling demand.

The European Commission, the EU’s legislative branch, is considering appealing as they believe the WTO’s findings contained serious legal errors.

History of the Airbus-Boeing dispute

The EU and the US have constantly claimed that each other’s airplane manufacturer is unfairly subsidized.

It was the US that first filed a case with the WTO 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.

Airbus said the WTO’s decision to drop previous references to the A380 causing lost sales to Boeing meant the United States should slash its authorized tariffs by $2 billion to $5.5 billion.

U.S. sources said only full compliance or a political settlement – which is widely seen as remote amid fragile economic ties – could legally cancel WTO approval for tariffs.

The WTO Appellate Body will cease to function after Dec. 10 due to U.S. blocking of new appointments, leaving a tight deadline to challenge Monday’s ruling.

Any appeals launched after that date risk falling into a legal void, while it remains unclear whether the body will be allowed to rule on appeals filed before then.

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