Airbus Makes Final Overture To End WTO Dispute

 - July 24, 2020, 9:56 AM

Airbus said on Friday that it has agreed with the governments of France and Spain to make amendments to the A350 Repayable Launch Investment (RLI) contracts in an effort to finally settle a 16-year dispute over government subsidies to respective airliner projects by the European airframe maker and Boeing. Calling it the “final step” to stop the long-standing dispute, Airbus claims the offer removes any justification for U.S. tariffs.

In a statement, Airbus said the tariffs imposed by the United States Trade Representative (USTR) continue to harm all targeted industry sectors, including U.S. airlines, and have added to a difficult environment resulting from the Covid-19 crisis. “This is why Airbus has decided to make a final step to remove the last contentious point and amend the French and Spanish contracts to what the WTO considers the appropriate interest rate and risk assessment benchmarks,” said Airbus. The company noted that the WTO has already ruled repayable launch investments a valid instrument for governments to partner with industry by sharing investment risks. “With this final move, Airbus considers itself in complete compliance with all WTO rulings,” it concluded. 

Friday’s announcement comes a bit more than two weeks after European Union trade commissioner Phil Hogan warned of an escalation of the trade war between the EU and the U.S. Monday after he said Washington had rejected overtures to settle the dispute. The salvo followed an increase in March of U.S. duties on Airbus jets and European airplane parts from 10 to 15 percent following a determination by the World Trade Organization that EU member states illegally subsidized the development of the A350 and A380.

Speaking during a European Parliament trade committee hearing, Hogan criticized the U.S. for its most recent threats to place duties on a range of EU goods and the Trump Administration’s apparent unwillingness to negotiate.

Based on the WTO ruling of the subsidy case against Airbus, the U.S. may impose tariffs of up to 100 percent on $7.5 billion of annual EU imports—including Airbus aircraft. The new duty rate follows a compliance report from the Geneva trade watchdog, released in December, that found that changes made to Airbus A350 and A380 development loans did not bring the four so-called Airbus countries—France, Germany, Spain, and the UK—in compliance with WTO recommendations. 

At the behest of Boeing, Washington State in March rescinded tax breaks to the company introduced more than a decade and a half ago and renewed in 2013 to attract 777X wing production to the state. The U.S. Trade Representative (USTR) in May notified the WTO of the elimination of the tax breaks, but a formal ruling remains months away.

Now, it appears the Europeans have blinked, leaving “the ball is in the court of the U.S.," as Hogan quipped on July 7.

“We have fully complied with all the WTO requirements. These additional amendments to the A350 RLIs demonstrate that Airbus has left no stone unturned to find a way towards a solution,” said Airbus CEO Guillaume Faury. “This is a clear signal of support to those who are suffering from the severe impact of the tariffs imposed by the USTR, especially at a time when industries are hard hit by the consequences of the Covid-19 crisis.”