The European Union announced on Friday 24 July that it has now fully complied with the World Trade Organization (WTO) ruling on its support for European aircraft manufacturer Airbus. It hopes that this gesture of appeasement will finally help to defuse the causes of a dispute that has pitted the United States and Europe against each other for 16 years.
As a reminder, the WTO ruled last October that European subsidies to Airbus had not been completely cancelled and thus allowed Washington to hit the EU with rebalancing measures amounting to 6.7 billion euros (see EUROPE 12448/24, 12427/10, 12350/17, 12348/7).
The last elements in dispute, pointed out by the WTO, mainly came from the support granted to the European aircraft manufacturer via contracts for the development of the A350 established with Germany, Spain, France and the United Kingdom, explained an industry source.
Compliance measures on these contracts with Germany and the United Kingdom had in the meantime been adopted by the EU, which the European Commission considers sufficient to ensure full compliance with the WTO ruling.
However, these measures, which are subject to WTO conformity assessment procedures, cannot be taken into account while Washington is blocking the WTO Appellate Body.
‘Olive branch’
Therefore, Airbus has taken a final step. By agreeing on an amendment to the repayable launch investment contracts for the A350 aircraft (RLI contracts) with France and Spain, the aircraft manufacturer is now applying the benchmark/commercial reference provided by the WTO. It will now reimburse the French and Spanish governments a higher amount, reflecting a higher rate of return than initially agreed.
“We have fully complied with all 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 Guillaume Faury, CEO of Airbus.
For the EU, these latest measures that have been announced thus constitute “an olive branch” extended towards Washington, according to an industry source.
Clearing the tariff slate
Europe now expects the Office of the US Trade Representative (USTR) to repeal existing tariff measures and, more importantly, to abandon its “carousel” of tariff countermeasures (see EUROPE 12514/24). Indeed, the USTR is threatening to increase its sanctions against European sectors and countries not involved in this dispute, to the detriment, in particular, of the Italian agri-food industry.
“This is a clear signal of support for those who are suffering from the severe impact o the tariffs imposed by the USTR, especially at a time when industries are hard hit by the consequences of the Covid-19 crisis”, Faury added.
“Unjustified tariffs on European products are not acceptable and, arising from the compliance in the Airbus case, we insist that the US immediately lift these unjustified tariffs”, urged Commissioner for Trade Phil Hogan.
As for the subsidies that certain States, including France, may provide to the aeronautics industry to cushion the impact of the health crisis, they are “100% in line with European obligations at the WTO”, an EU source assured.
Blocking, delaying, etc.
If, however, the US Representative continues to turn a deaf ear, the EU will once again be unable to appeal... The ultimate leverage is the application of its own tariff measures in the dispute over the aircraft manufacturer Boeing (see EUROPE 12483/17, 12352/16, 12224/20, 11805/10).
But the WTO decision in this twin dispute is still pending. Because of the Covid-19 pandemic, the judgment will probably not be known until October 2020, one source estimated. (Original version in French by Hermine Donceel)