Economy

U.S. threatens sanctions after trade body rules against Airbus

U.S. threatens sanctions after trade body rules against Airbus

The report comes at a time of mounting trade tensions over USA aluminum and steel tariffs and the impact on European firms of Washington's decision to exit the Iran nuclear pact.

As Donald Trump threatens European companies with sanctions following his withdrawal from the United Nations framework agreement with Iran on its nuclear programme, the World Trade Organisation Appellate Body has concluded that Boeing's complaint of illegal subsidies to Airbus by some European governments is largely unproven under its rules.

Airbus shares closed down 0.9 percent.

The ruling clears the way for what could be the largest retaliatory action in WTO history.

The United States brought the case to the WTO in 2004.

Boeing states that the authorised tariffs are likely to total billions in duties per year, unless and until Airbus addresses the illegal subsidies it received from European governments for its most recently launched airplanes.

The European Commission argued that the WTO decision rejected most USA claims and was its victory. That figure includes the many subsidies that the WTO said were lawful.

The size of USA tariffs to be allowed will be determined through a WTO arbitration process, and will be based on the annual harm to United States and Boeing - losses that the U.S. had previously pegged as ranging from $7bn to $10bn a year. It said it would comply swiftly on the rest.

At the same time, the WTO is close to finalizing a similarly drawn-out case against subsidies for Boeing, and Airbus says this could in turn spark European Union sanctions against the United States.

Airbus General Counsel John Harrison said: "Airbus recognizes the importance of the WTO and the Appellate Body's findings and will do what is necessary to correct any errors and this report confirms the efforts we are making".

Both sides are expected to push for billions of dollars in sanctions annually by barring a negotiation deal.

Bob Novick, a legal counsel for Boeing, told reporters that the subsidies led to lost sales and that the United States will be free to decide over the next several months what European products will be targeted for tariffs to apply maximum pressure to ensure compliance.

European officials seized on Boeing's recent criticism of the A380's poor sales record as a way to limit any estimates of damage to Boeing caused by subsidies for the double-decker jet. As airlines expand into the Middle East and China, both companies will be vying for new business, he said. For a claim to stick at the WTO, subsidies must be found not just to exist but to have caused real harm. In a statement, he also noted that Boeing would find it hard to prove before the arbitration panel any significant damage from the subsidies granted to Airbus.

The trade body also upheld an earlier finding that the European Union aid had no adverse affect on the market for single-aisle jet sales, the largest source of profit for Boeing and Airbus.

"Companies should not have to compete with governments - that is what this case is about", said Robert Novick, co-managing partner at Boeing's trade lawyers WilmerHale.


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