Airbus to remove subsidies in bid to end US dispute

Airbus announced on Friday that it had moved to eliminate subsidies deemed illegal by the World Trade Organization in the latest move to end a long-running dispute with the US over state aid to aircraft manufacturers.

The company said it had agreed with the governments of France and Spain to amend so-called launch aid arrangements — a subsidy designed to help manufacturers develop new models.

The aid, a form of state support, has been at the centre of a rift that led the US to target European products ranging from German machine tools to French wine in retaliation.

“After 16 years of litigation at the World Trade Organization, this is the final step to stop the longstanding dispute and removes any justification for US tariffs,” Airbus said in a statement.

“The tariffs imposed by the United States Trade Representative (USTR) are currently harming all targeted industry sectors, including US airlines, and are adding to a very difficult environment as a consequence of the Covid-19 crisis.”

The move is set to be welcomed by Brussels, which has sought for months to reach a settlement with the US to end the dispute.

Phil Hogan, EU trade commissioner, has bemoaned the lack of engagement by the Trump administration in coming to an agreement. The EU has a parallel action at the WTO against aid for Boeing, with a decision expected in September on the volume of retaliation the bloc can take against US products. 

Washington was awarded the right to impose punitive levies of as much as 100 per cent on $7.5bn of European goods — the result of a WTO decision last year that the EU had failed to eradicate illegal support for Airbus aircraft. The US has ratcheted up those levies in stages, with the next deadline falling in August.

The office of the US trade representative last month published a consultative list of products that could be hit in the next wave of extra tariffs, with a particular focus on exports from the four Airbus manufacturing countries: France, Spain, Germany or the UK.

Products in the line of fire include cashmere clothes and non-alcoholic beer.

EU officials say that Washington in recent months has rebuffed clear overtures from Brussels to reach a deal that would end over a decade of litigation at the WTO relating to the two aircraft manufacturers; officials blame the approaching election and delays to the WTO decision on Boeing.

Airbus said that it had moved to “amend the French and Spanish [launch aid] contracts to what the WTO considers the appropriate interest rate and risk assessment benchmarks.”

“With this final move, Airbus considers itself in complete compliance with all WTO rulings,” the company said.