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Airbus to remove subsidies in attempt to end US dispute

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.

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