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U.S. threatens sanctions as WTO raps Airbus subsidies

Reuters  |  GENEVA/PARIS 

By and Tim Hepher

GENEVA/PARIS (Reuters) - The ruled on Tuesday the had maintained illegal support to , prompting the to threaten sanctions against European products in the first of two key aircraft subsidy decisions due this year.

The WTO report coincides with mounting trade tensions over U.S. aluminium and and the impact on European firms of Washington's decision to exit the nuclear pact.

It is also part of a two-way battle between the EU and the over aircraft subsidies that could spark tit-for-tat reprisals between the two trade superpowers.

The WTO's appeals body said the EU had failed to remove subsidised government development loans for the world's largest airliner, the A380, and Europe's newest long-haul jet, the A350, causing losses for and U.S.

But the watchdog dismissed U.S. claims that loans for Airbus's most popular models, the and A330, were also costing significant sales and in so doing narrowed the scope of one of the world's longest and costliest trade spats.

shares closed down 0.9 percent.

U.S. Trade said the would slap countermeasures on European goods unless the EU stopped "harming U.S. interests". WTO rules allow it to target any industry since all goods fall into one category.

"It is long past time for the EU to end these subsidies," he said.

predicted such tariffs could reach billions of dollars a year starting as early as 2019.

The said the U.S. had lost most of its claims and that much of the aid faulted by the WTO in earlier rounds of the 14-year-old case had expired in 2011. It said it would comply swiftly on the rest.

The EU highlighted earlier wins in a parallel case against U.S. subsidies for Boeing, and said this could in turn spark EU sanctions against the United States once the timetable for that case reaches the same point later this year.

"Today's report is really only half the story," Airbus said.

COMPETING CLAIMS

Barring a settlement, both sides are expected to push for billions of dollars in sanctions annually, but the amounts will depend on arbitration, expected to take around a year.

The WTO case has yielded 5,000 pages of filings and cost tens of millions of dollars.

Boeing says Airbus received illegal aid worth $22 billion, including $18 billion in loans from governments. Of these, $9 billion are involved in the outstanding and claims.

Airbus disputes those numbers, saying they overstate the amount of support embedded in the contested loans. It has meanwhile levelled significant subsidy claims against Boeing.

European officials seized on Boeing's recent criticism of the A380's poor sales record as a way to limit any estimates of damage to Boeing caused by subsidies for the double-decker jet.

Both companies have cut output of four-engined and due to airlines' preference for smaller models and Boeing has long said the industry's behemoths have had their day.

Airbus says Boeing's willingness to deliver the last rites to the contradicts Boeing's claim that it has been damaged by the same aircraft. For a claim to stick at the WTO, subsidies must be found not just to exist but to have caused real harm.

But U.S. sources say the aid meant Airbus was able to gamble on building the world's largest jetliner without facing the financial consequences of market failure, bolstering its balance sheet in a way that disadvantages Boeing to this day.

"Companies should not have to compete with governments - that is what this case is about," said Robert Novick, at Boeing's trade lawyers WilmerHale.

(Additional reporting by Ankit Ajmera, Writing by Tim Hepher, editing by Tom Miles, and Jane Merriman)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Wed, May 16 2018. 00:27 IST
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