Sunday , August 19 2018

Boeing trade-case win prompts new Trump threat of EU sanctions

Bloomberg

The US threatened to impose sanctions against the European Union after the World Trade Organization ruled that Airbus SE received illegal government funding to develop jetliners, costing Boeing Co. sales.
The final decision affirmed a 2016 finding that the EU had failed to eliminate unfair subsidies for two Airbus twin-aisle models, ending a long-running trade case. The international court is expected to rule later this year on a separate case in which the EU challenged billions of dollars in US tax incentives to Boeing.
The litigation adds to the tension between the US and Europe, two once-cooperative trade partners that are already sparring over US President Donald Trump’s steel and aluminum tariffs, jeopardising $40 billion in aircraft sales.
The next stage of the 14-year battle decided Tuesday will be over the size of the tariffs the US will be allowed to impose to compensate for lost exports. The Geneva-based WTO can’t force nations or companies to drop payments that violate trade rules, but it can authorise retaliatory measures to pressure governments into complying with its rulings.

US ‘Countermeasures’
The disputed funding to Airbus has cost US aerospace manufacturers “tens of billions of dollars in lost sales,” US Trade Representative Robert Lighthizer said in a statement.
“Unless the EU finally takes action to stop breaking the rules and harming US interests, the United States will have to move forward with countermeasures on EU products.”
The WTO decision affirmed a ruling that France, Germany, Spain and the UK have failed to adequately remedy market-distorting aid for the launch of Airbus’s A380 superjumbo. The bloc compounded the issue with below-market loans for the planemaker’s marquee A350 jetliner.
The financing hurt sales of Boeing’s 747 jumbo jetliner and 787 Dreamliner and clipped exports to the EU, Australia, China, Korea and Singapore, the panel determined.
The trade body also upheld an earlier finding that the EU aid had no adverse affect on the market for single-aisle jet sales, the largest source of profit for Boeing and Airbus.

Export Losses
The size of US tariffs to be allowed will be determined through a WTO arbitration process, and will be based on the annual harm to US and Boeing — losses that the US had previously pegged as ranging from $7 billion to $10 billion a year.
Airbus said it would take steps to ensure its aid complies with the decision, and predicted any eventual sanctions would be minor.
“Despite Boeing’s rhetoric, it is clear that their position today is straightforward healthy: they have half the market and a full order book, they have clearly not been damaged by Airbus repayable loans,” Airbus CEO Tom Enders said in a statement.
Shares of Airbus reversed earlier gains to trade down as much as
1.8 percent immediately after the ruling was published.
The stock fell 0.9 percent to 96.25 euros at the close in Paris. Boeing fell less than 1 percent to $342.09 in New York, recovering from losses logged before the decision was issued.
The US and the EU have spent more than a decade wrangling over various government efforts to help Chicago-based Boeing and Toulouse, France-based Airbus defray billions of dollars in costs to design and produce commercial aircraft.
Later this year, a separate WTO compliance panel is expected to deliver its decision on whether the US complied with the terms of a 2012 ruling against illegal US tax subsidies that gave Boeing an unfair advantage.

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