Trade tactics

US forgoes penalty round in Boeing-Airbus dispute at WTO

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Washington's attempts to circumvent the WTO are hobbling the organization. Source: Reuters

The US did not follow up on the World Trade Organization’s verdict that some Airbus subsidies were illegal by seeking a penalty tariff. But the surprise move on Monday was less a ceasefire in the conflict with Boeing, and more a tactical step to remove the dispute from the WTO’s auspices.

In mid May, the WTO found in favor of Boeing and the US by upholding a 2016 ruling that the European Union had failed to stop paying illegal subsidies to Airbus. The two companies each have a 50 percent share of the commercial aviation market and a long history of rivalry.

US representatives formally accepted the decision in Boeing’s favor but said they were not ready to follow up with penalty tariffs. Instead, they said they prefer to enter into negotiations with EU authorities to settle the dispute.

This unexpectedly mild stance comes amid an escalating trade dispute between the US and the EU as President Donald Trump levies new tariffs on steel and aluminum imports, threatens higher tariffs on automobiles, and re-imposes sanctions for business with Iran. It also reflects the US administration’s dislike for multilateral organizations such as the WTO.

The tactical stance on tariffs isn’t Washington’s only move to circumvent the influence of the World Trade Organization. The US, for instance, continues to block the naming of new judges for trade disputes. Three positions have been vacant for some time and the failure to name replacements risks hobbling resolution processes.

As for the Airbus subsidies themselves, European representatives said Monday they had already resolved the issues flagged by the WTO earlier this month. Startup subsidies for the A350 have been paid back. Aid for the launch of the A380 has become a moot point, since lagging sales of the superjumbo ensure that Boeing has suffered no losses from it.

At the same time, in a separate case, a verdict on alleged subsidies to Boeing in the form of $290 million in tax relief from the state of Washington is still pending at the WTO. These would presumably be part of any voluntary settlement by the two parties.

The core of the dispute is on a much grander scale than the two WTO procedures, with allegations of billion in subsidies over years. The EU in the past has accused Boeing of receiving $8.7 billion in subsidies for the development of the 777. Boeing, for its part, argues that Airbus got €4 billion in aid for development of the A380.

Any agreements will matter not only to the aircraft makers but could also suggest how future trade spats are resolved, and therefore how much power the WTO has in the future.

Thomas Hanke is Paris correspondent for Handelsblatt. Jens Koenen covers aviation from Frankfurt. Handelsblatt Global editor Darrell Delamaide adapted this article into English. To contact the authors: hanke@handelsblatt.com and koenen@handelsblatt.com.

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