Picture: REUTERS/EDGAR SU
Picture: REUTERS/EDGAR SU

GENEVA/PARIS — The World Trade Organisation has criticised the EU which it says failed to rein in subsidies running into billions of dollars for plane maker Airbus, ratcheting up tension in the battle for airliner orders.

The WTO ruling on Thursday comes amid of a series of tit-for-tat transatlantic complaints about aircraft subsidies in the world’s biggest trade dispute, still raging after 12 years of bitter argument over support for Airbus and rival Boeing.

The WTO said the EU and four nations — Britain, France, Germany and Spain — failed to comply with earlier rulings against all but two of 36 contested measures, including billions of dollars of European government loans to Airbus.

READ THIS: WTO says EU failed to rein in Airbus subsidies

The loans were a "genuine and substantial" cause of significant lost sales for Airbus’s US competitor Boeing, it said.

In a blow to Europe’s long-held belief that its newest and costliest jetliner, the A350, fell outside the case, the WTO for the first time said it had been subsidised but rejected US claims that it fell into the most toxic category of "prohibited" aid.

It adopted the same pattern for the A380, the world’s largest jetliner, always at the heart of a case that runs to thousands of pages in rulings and appeals.

US officials said Airbus had failed to undo $22bn in subsidies, including $4bn for the A350, on which Airbus’s prospects in the wide-body jet market largely depend.

European industry officials dispute those numbers, saying they overstate support at stake within the loans.

US trade representative Michael Froman said the subsidies cost the US tens of billions of dollars in exports and urged Europe to end subsidised financing "immediately".

The EU, however, suggested it would appeal against the latest findings, some of which were "unsatisfactory".

The European Commission said the 574-page document should be read in the context of two other WTO reports expected to address US subsidies to Boeing in coming months.

This comes amid a US presidential campaign featuring claims that US companies are suffering from cheating by foreign competitors amid growing support for protectionism on both sides of the Atlantic.

In earlier findings, the WTO ruled that Airbus and Boeing got billions of dollars worth of illegal subsidies.

Both sides have sought WTO permission to draw up sanctions that could penalise other industries, with the US calling for up to $10bn in counter-measures and the EU $12bn.

But no reprisals are expected until the WTO process, about three years behind schedule, has been exhausted. Trade sources say that could take months or years and many analysts expect a negotiated settlement.

Ping-pong

Officials in both camps said they were ready to negotiate, but robust comments from both manufacturers and the coming elections in the US, France and Germany — the main home to Airbus — suggested little immediate room for manoeuvre.

In a game of ping-pong that could determine how other jet manufacturers are regulated, Boeing dismissed as "happy talk" an Airbus claim of near-victory and suggesting only minor tweaks in its funding system. An Airbus spokesman said Boeing was "in denial" about subsidies for its own jets.

The public clash came as both sides digest unpublished new WTO findings in a third pillar to the dispute, brought by the EU over Washington tax breaks to Boeing, at least part of which Airbus says it expects to fall into the ‘prohibited’ bucket.

Boeing sought to dispel the notion that the three cases are interconnected and resolution of one depends on the other: an important point for it to win if retaliation is to begin any time soon.

"We’re confident that the United States will pursue those remedies necessary," said Ted Austell, Boeing’s vice-president for regulatory affairs.

Airbus strategy appeared to be to hold out for a more favourable ruling on Boeing aid early next year.

"Boeing might later be hit by a rock when the next WTO ruling comes," CE Tom Enders tweeted.

Reuters