The World Trade Organization (WTO) recently ruled in favour of the United Statesw in a landmark decision against subsidies provided by the European Union to Airbus which negatively affected American planemaker Boeing.
The largest arbitration award in the history of the WTO will allow America to slap an annual US$7.5 billion dollar tariff to the EU.
"Finally, after 15 years of litigation, the WTO has confirmed that the United States is entitled to impose countermeasures in response to the EU’s illegal subsidies," US Trade Representative Robert E. Lighthizer said.
The WTO ruling follows decades of dispute over EU countries' roles in propping up Airbus. The US first logged its complaint in 2004 when it asked the UK, Germany, Spain and France to discuss government loans to Airbus and how those practices are negatively impacting Boeing, Airbus' main competitor.
"In May 2011, the Appellate Body confirmed that the EU and four of its Member States (Germany, France, the UK, and Spain) conferred more than $18 billion in subsidized financing to Airbus and had caused Boeing to lose sales of more than 300 aircraft and significant market share throughout the world," the US statement read.
Lighthizer said the US will begin applying WTO-approved tariffs on certain EU goods – from EU member states, but the bulk of the tariffs will be applied to imports from France, Germany, Spain, and the UK, responsible for the subsidies.
Beginning October 18, the US will also impose a 10% tariff on European aircraft.
The US said the arbitrator calculated the tariff amount based on WTO findings on the EU's launch to aid Airbus which caused a significant loss of sales to Boeing on large civil aircraft, as well as impeding exports of such planes to the EU, Australia, China, South Korea, Singapore and the United Arab Emirates.
Pursuant to WTO rules, the EU is not allowed to retaliate against WTO-authorised countermeasures. The arbitrator's decision is also final and not subject to appeal.
A Boeing spokesperson said the EU and Airbus still have time to avoid the tariffs. "Airbus could still completely avoid these tariffs by coming into full compliance with its obligations. We hope it will finally do that."
Meanwhile, Airbus in a separate statement called for talks over the dispute — and like Boeing, said the tariffs could still be avoided.
Airbus CEO Guillaume Faury said the European planemaker is "hopeful that the US and the EU will agree to find a negotiated solution before creating serious damage to the aviation industry as well as to trade relations and the global economy."
He said a similar WTO complaint against Boeing could provide the EU with grounds to claim countermeasures on US products "at a level that could exceed US sanctions."
"In the coming months, the WTO will determine the amount of tariff countermeasures the EU can impose on US products – including imported Boeing aircraft – in the parallel counter case regarding illegal subsidies to Boeing. The WTO has already found that the US failed to address illegal subsidies causing harm to Airbus," Faury said.
The Airbus chief reiterated that if applied, these tariffs on both sides will severely impact US and EU industries, putting high costs on the acquisition of new aircraft for both US and EU airlines.
"Aviation is a global industry. Evidence of that is the fact that close to 40% of Airbus’ aircraft-related procurement comes from US aerospace suppliers. This US supply chain supports 275,000 American jobs in 40 states through spending that has totalled $50 billion in the last three years If tariffs are applied, the entire global industry will be harmed," he added.