EU rapped by WTO for $10bn a year Airbus subsidies

An Airbus A380 Image copyright AP

The EU has failed to comply with rulings that it should cut subsidies to aircraft maker Airbus, the World Trade Organisation has ruled.

Rival Boeing says it could pave the way for the US to seek up to $10bn (£8bn) in annual retaliatory tariffs.

It follows years of accusations between the two aerospace giants that each received state funding.

The WTO is yet to rule on a similar EU complaint that Boeing benefits from billions of dollars in tax breaks.

Washington responded to the ruling by calling for an immediate halt for EU subsidies to support US jobs.

Meanwhile Airbus said it would appeal the judgment and the EU said it found some of the findings "unsatisfactory".

Analysis: Andrew Walker, BBC economics correspondent

There are two suppliers of large civil aircraft: Boeing in the US and Airbus in Europe.

The EU and the US have both taken complaints to the WTO about subsidies supplied by the other.

At the smaller end of the market segment there are other suppliers, and certainly the potential for more from China and Russia, for example, in the future - which could well involve state subsidies that eventually end up in front of a WTO dispute settlement panel.

For now, though the big stuff is a duopoly. There are two players with state backing, according to WTO judgements. For the rest of the world that is pretty good news.

It ensures there is at least some competition. And without the subsidies, a large plane could well be even more expensive.

Lost sales

It is the latest of a series of tit-for-tat transatlantic complaints about aircraft subsidies that make up the world's largest and longest-running trade dispute, which has so far been bitterly battled out over 12 years.

In June 2011, the WTO found that the EU and four of its member countries provided billions of dollars in subsidised financing to Airbus.

Image copyright Reuters

While the EU subsequently claimed to have come into compliance, the US disagreed and requested that a compliance panel intervene.

The compliance panel has now ruled that the EU failed to comply with all but two of 36 earlier rulings to cut back subsidies European governments provided to Airbus.

The loans were a "genuine and substantial" cause of significant lost sales for Boeing, the WTO said.

The EU had argued that the most recent Airbus jet, the A350, fell outside the case, but that was rejected by the WTO which said funding for the jet had been subsidised.

However it rejected US claims that it fell into the most serious category of "prohibited" aid.

The WTO has also issued rulings over the years saying that Boeing was the recipient of banned federal and state support.

Sweeping victory

Dennis Muilenburg, Boeing chairman, said: "Today's ruling finally holds the EU and Airbus to account for their flouting of global trade rules."

"This long-awaited decision is a victory for fair trade worldwide and for US aerospace workers, in particular."

US Trade Representative Michael Froman said the panel's finding was "a sweeping victory for the United States and its aerospace workers".

He called on the EU, Germany, France, the United Kingdom and Spain "to respect WTO rules".

"We call on them to end subsidised financing of Airbus immediately,'' he said.

In response, the EU said: "There are certain findings of the panel that we consider to be unsatisfactory. We are closely analysing the report."

It said the findings should be read in the context of two other reports expected to address US subsidies in coming months.

Airbus said it mostly conformed with its global trade commitments and would appeal.

"We only needed to make limited changes in European policies and practices to comply," it said in a statement.

"We will address the few still remaining points indicated by the report in our appeal," Airbus said.

Both the EU and the United States have the right to appeal against the ruling.

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