Airbus announced on Friday that it had moved to eliminate subsidies deemed illegal by the World Trade Organization, in the latest EU move to end a long-running dispute with the US over state aid to aircraft manufacturers.
The company said it had agreed with the governments of France and Spain to amend repayable launch aid arrangements — a loan linked to exports that aims to help manufacturers develop new models — on the A350 wide-bodied jet, which the WTO ruled was a subsidy.
The low interest rates paid on the aid have been at the centre of a rift that led the US to slap tariffs of up to 25 per cent on European products ranging from German machine tools to French wine in retaliation. The move comes after the US threatened to impose further tariffs on a wider range of EU imports.
“After 16 years of litigation at the World Trade Organization, this is the final step to stop the longstanding dispute and removes any justification for US tariffs,” Airbus said in a statement.
“The tariffs imposed by the United States Trade Representative (USTR) are currently harming all targeted industry sectors, including US airlines, and are adding to a very difficult environment as a consequence of the Covid-19 crisis,” the company said.
The move was welcomed by Brussels, which has sought for months to reach a settlement with the US to end the dispute.
Phil Hogan, EU trade commissioner, called on the US to withdraw punitive tariffs on EU goods, saying that Airbus’s announcement meant Europe was living up to its obligations.
“Unjustified tariffs on European products are not acceptable and, arising from the compliance in the Airbus case, we insist that the United States lifts these unjustified tariffs immediately,” he said.
Brussels has bemoaned the lack of engagement by the Trump administration in coming to an agreement. The EU has a parallel action at the WTO against aid for Boeing, with a decision expected in September on the volume of retaliation the bloc can take against US products.
Mr Hogan reiterated warnings that, should there be no de-escalation by the US, the EU will retaliate as soon as the WTO has announced its decision. “In the absence of a settlement, the EU will be ready to fully avail itself of its own sanction rights,” he said.
Washington was last year awarded the right to impose punitive levies of as much as 100 per cent on $7.5bn of European goods — the result of a WTO decision that the EU had failed to eradicate illegal support for Airbus aircraft. The US has ratcheted up those levies in stages, with the next deadline falling in August.
The office of the USTR last month published a consultative list of products that could be hit in the next wave of extra tariffs, with a particular focus on exports from the four Airbus manufacturing countries: France, Spain, Germany and the UK. Products in the line of fire include cashmere clothing and non-alcoholic beer.
People close to Airbus said the group hoped to avert a new wave of tariffs by agreeing to increase the interest rates on French and Spanish launch aid. The offer follows discussions with several of the sectors that have been hard hit by US tariffs. Airbus has come under heavy public pressure to take further steps to resolve the dispute in light of the economic impact of the coronavirus crisis.
The company is not disclosing the financial impact of the move. However, the downturn caused by Covid-19 is likely to reduce the financial impact, as the payments are linked to deliveries of the A350 aircraft. In April these were cut from roughly nine a month to just six. Launch aid extended by Germany had already been amended, while the UK loan had been repaid and so was not at issue, one person said.
Airbus continues to insist that repayable launch aid was deemed legal by the WTO and could still be used for future aircraft development.
EU officials say Washington in recent months has rebuffed clear overtures from Brussels to reach a deal that would end more than a decade of litigation at the WTO relating to the two aircraft manufacturers; officials blame the approaching election and delays to the WTO decision on Boeing.
Bruno Le Maire, French economy minister, echoed Mr Hogan’s warning that Brussels was preparing its own measures against US products. “We are determined to uphold our rights,” he said.
“If the US continues to refuse a friendly negotiation, the EU will have no other choice than to adopt tariff sanctions.”
Airbus said it had moved to “amend the French and Spanish [launch aid] contracts to what the WTO considers the appropriate interest rate and risk assessment benchmarks”.
“With this final move, Airbus considers itself in complete compliance with all WTO rulings,” the company said.