WTO rejects EU claims that it no longer provides subsidies to Airbus

By Tim Hepher and Philip Blenkinsop

PARIS/BRUSSELS (Reuters) - The World Trade Organization on Monday rejected European Union claims that it no longer provides subsidies to planemaker Airbus, underscoring tariffs recently imposed by the United States on European goods.

A new compliance report from the Geneva trade watchdog found that the Airbus A380 and A350 jetliners continue to be subsidised as a result of past European government loans.

It is the latest move in a record transatlantic trade dispute involving mutual claims of illegal aircraft subsidies, coming to a head at a time of rising global trade tensions.

The United States was in October awarded the right to impose tariffs on $7.5 billion of annual EU imports in the case against Airbus. It went ahead with partial tariffs on most Airbus jets and products from cheese to olives and single-malt whisky.

A decision on retaliation rights for the EU in a parallel case on aid for Boeing is due next year..

In Monday's finding, a three-person panel rejected EU claims that a recent decision by Airbus to stop producing the slow-selling A380 meant the giant airliner could no longer be seen as a threat to Boeing, whose competing 747 is also out of fashion.

While the WTO no longer faulted Airbus for causing lost sales to Boeing with the A380, which is no longer marketed, it ruled that the superjumbo would continue to cause market-share damage to Boeing for as long as it is produced and delivered.

Airbus plans to shut production in mid-2021.

The WTO appeared to strengthen findings against the A350, saying it had both cost sales and damaged Boeing's market-share prospects - a process called impedance - in the busier twin-engined long-haul market where Boeing offers its 787 Dreamliner.

The European Commission said it took note of the report, adding it contained a number of serious legal errors.

The Commission, with Irishman Phil Hogan leading trade policy since Dec 1, said it would consider its next steps, including a possible appeal, while seeking an overall agreement on aircraft subsidies with the United States.

There was no immediate comment from the U.S. Trade Representative.

APPEAL DEADLINE

European sources said the decision to drop references to the A380 causing lost sales to Boeing had cut about $2 billion from a list of harms worth $7.5 billion that had driven the WTO's decision to allow U.S. tariffs up to the same amount.

They did not immediately say whether the finding against the A350 would change the equation in the opposite direction.

U.S. sources argued such calculations were "irrelevant," since only full compliance or an agreement to settle the trade dispute politically would cancel WTO approval for the tariffs.

Both sides can appeal the latest finding but doing so could place the WTO in uncertain legal territory, experts said.

The WTO Appellate Body, which hears appeals, will cease to function after Dec. 10 due to U.S. blocking of new appointments, leaving a tight deadline to challenge Monday's ruling.

Any appeals launched after that date risk falling into a legal void, while it remains unclear whether the Appellate Body will be allowed to rule on appeals filed before then.

Officials on both sides have expressed support for a negotiated settlement while accusing the other of failing to take the prospect of a negotiated solution seriously.

Airbus has said all sides stand to lose from a protracted trade war while Boeing has said the question of any bilateral government negotiations is a matter for the U.S. Administration. Both planemakers have promised to comply with WTO rulings.