WTO gives EU approval to hit US with tariffs in Airbus-Boeing ruling

The World Trade Organization has given the go-ahead to the EU to place tariffs on almost $4 billion (€3.4 billion) of US goods in retaliation for illegal state aid given to Boeing.

The decision has prompted renewed calls on both sides of the Atlantic for a settlement to the 16-year-old dispute.

The EU now must decide when to put the tariffs in place and what form they will take.

The WTO has given $3.99 billion in retaliation rights to the EU - less than half the $8.58 billion (€7.31 billion) originally requested - and significantly less than the $7.5 billion (€6.38 billion) the US was given in last year's parallel case against Airbus.

Brussels has already indicated a wide range of US products that may be subject to the tariffs, including fitness equipment, aircraft and blueberries.

Valdis Dombrovskis, the EU trade commissioner, said the long-awaited WTO ruling should be the necessary cue for both sides to come together and find an agreement over airline subsidy rules.

“Our strong preference is for a negotiated settlement. Otherwise, we will be forced to defend our interests and respond in a proportionate way,” he said.

The transatlantic disagreement over subsidies to Airbus and Boeing has become one of the longest-running pieces of litigation in WTO history.

The current dispute began in 2004 when Airbus overtook Boeing for the first time in terms of deliveries but its roots go back further still. 

The US had brokered an agreement with the EU in 1992 over state aid, but then launched a case against European subsidies to its aerospace sector which dated back to the 1970s, claiming at first that $22 billion in illegal subsidies had been given to Airbus.

A few months later, the EU retaliated with a challenge of its own - that the US government had offered $23 billion in illegal state aid to Boeing.

Policymakers in the EU have been pushing for some form of a settlement for months, but have also been frustrated by the time lag between last year's WTO decision on US rights to apply tariffs on EU products in response to Airbus and the announcement made today.

During that time, the US has slapped heavy tariffs on a wide range of goods from Italian cheese to French wine, while the EU has been unable to retaliate in kind.

The US trade representative's (USTR) office responded to the WTO ruling by arguing that the EU had "no legal basis" to impose tariffs given that the subsidies in question are no longer being granted. 

USTR threatened retaliation if the EU pushed ahead with tariffs.

Robert Lighthizer, the US trade representative, said the US remained “determined to find a resolution to this dispute that addresses the massive subsidies European governments have provided to Airbus and the harm to US aerospace workers and businesses.

“We are waiting for a response from the EU to a recent US proposal and will intensify our ongoing negotiations with the EU to restore fair competition and a level playing field to this sector,” he added.

Mr Dombrovskis, who has only been confirmed in the role of EU trade commissioner since last week, must now make a decision over whether any tariffs should be applied before the US election on November 3.

He has said that he "would much prefer" not to apply the tariffs on US products because “additional duties are not in the economic interest of either side”.

The EU must still obtain authorisation from the WTO to put any new tariffs in place, though this is essentially a formality and could be done at a meeting of the dispute settlement body on October 26.

In making its decision, the WTO found that aid granted to Boeing by Washington state was illegal. Though both the White House and the aircraft manufacturer insist that any advantages have now been withdrawn.

Officials at both Boeing and Airbus reportedly told the FT that they were eager to see a settlement to the dispute that has become an expensive distraction at a time when the aerospace industry is racing to meet climate targets whilst also dealing with the impact of the coronavirus.

The fact that the EU's list of retaliatory tariffs includes aircraft is a source of much consternation in Washington DC. The potentially punishing additional duties come at a pivotal time for Boeing, which is eager to have its 737 Max recertified after deadly crashes and a subsequent safety investigation.

Guillaume Faury, Airbus’s chief executive, told FT the company was “prepared and ready to support a negotiation process that leads to a fair settlement . . . it is time to find a solution now so that tariffs can be removed on both sides of the Atlantic”.

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