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Airbus ruling may strain trade ties with Europe

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The World Trade Organization (WTO) opened the door for the Trump administration to impose billions of dollars in retaliatory sanctions on European imports with a landmark ruling on Tuesday that Europe had illegally subsidised the aircraft giant Airbus to the detriment of its US competitor Boeing.

[PARIS] The World Trade Organization (WTO) opened the door for the Trump administration to impose billions of dollars in retaliatory sanctions on European imports with a landmark ruling on Tuesday that Europe had illegally subsidised the aircraft giant Airbus to the detriment of its US competitor Boeing.

The ruling could further strain trans-Atlantic trade relations, which have grown increasingly tense since US President Donald Trump vowed to impose tariffs on steel and aluminium imports from Europe and to sanction European Union companies doing business in Iran following his withdrawal from the 2015 nuclear accord.

“President Trump has been clear that we will use every available tool to ensure free and fair trade benefits American workers,” Robert Lighthizer, the US trade representative, said after the ruling. “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.”

A negotiated settlement remains possible, and the same appellate body that ruled on Tuesday must still decide the other half of the dueling claims: allegations that the United States improperly subsidised Boeing. Should the United States decide to retaliate, any countermeasures could take months to decide.

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Market voices on:

“The broader context — of tariffs and unilateral trade measures — is unpleasant and makes this a poorly timed development,” said Richard Aboulafia, vice-president of analysis at Teal Group Corp, a consulting firm in Fairfax, Virginia. “But there is still the hope of a negotiated settlement and perhaps even a new set of mutually agreed rules.”

Calling it “the largest-ever WTO authorisation of retaliatory tariffs,” Boeing predicted that the US government could impose tariffs worth billions of dollars on European Union imports. Those tariffs would make up for the business that Boeing claims it lost when Europe injected around 22 billion euros (S$35 billion) in financial support to help Airbus develop the superjumbo A380 and the widebody A350 airliners. Boeing has estimated that it suffered commercial damages worth between US$7 billion and US$10 billion as a result.

The ruling is the latest action in an acrimonious 14-year battle between the aviation rivals, which have undertaken a seemingly endless spate of lawsuits and counterlawsuits before the trade body.

NYTIMES