How far EU-U.S. aircraft subsidy dispute will go?

FRANKFURT, Oct. 28 (Xinhua) — The World Trade Organization (WTO) on Monday confirmed the retaliation rights of the European Union (EU) in reaction to illegal subsidies granted to the U.S. aircraft maker Boeing, prompting many to wonder what is the next episode of the 16-year-old trade row.

On Monday, European Commission Executive Vice-President Valdis Dombrovskis said in a statement that the bloc “is preparing the countermeasures” in close consultation with member states. The EU can now increase its duties on U.S. exports worth up to 4 billion U.S. dollars.

“As I have made clear all along, our preferred outcome is a negotiated settlement with the U.S. To that end, we continue to engage intensively with our American counterparts,” said Dombrovskis, adding that he is in regular contact with U.S. Trade Representative Robert Lighthizer.

But “in the absence of a negotiated outcome, the EU will be ready to take action in line with the WTO ruling,” Dombrovskis noted.

The EU has already prepared a preliminary list of U.S. products that could be used in countermeasures, following a public consultation last year. Products on the list range from ketchup to road tractors.

Monday’s formal authorization is a validation of an arbitration decision the WTO announced earlier this month. In reaction to the decision, Lighthizer said in a press release earlier in the month that “the EU has no valid basis to retaliate against any U.S. products.”

The long-standing issue between the EU and the United States began in 2004, when the United States accused France, Spain and Germany — also known as the “Airbus member states” — of providing illegal subsidies and grants to support a range of Airbus products.

Following prolonged legal proceedings, the WTO allowed the United States to take countermeasures against European exports worth up to 7.5 billion dollars in October 2019.


While some experts may fear another round of tit-for-tat, others believe that it is unlikely for the EU to take immediate action before the U.S. elections in November, as the global economic slump this year further complicates the issue.

William Reinsch, a senior adviser at Center for Strategic and International Studies, a think-tank based in Washington D.C., said in a commentary published on Oct. 19 that the EU is likely to wait until after the U.S. elections to decide on its next move, as the results of the elections may affect the negotiating prospect.

Citing an EU diplomat, The Financial Times reported that the bloc had not yet started its formal internal procedures to introduce additional duties.

The EU Mission to the WTO tweeted Monday that the EU’s aim is “to reach a balanced and rapid settlement” with the United States, reaffirming the willingness of the bloc to be back to the negotiating table with the United States.

However, Reinsch also noted that “the gap is wide” with regard to negotiating a potential settlement.

“The EU position going in is that they promise to eliminate the subsidies and not give any more and that this time they really mean it. The U.S. position is that it is not good enough; the European Union must also pay compensation for past subsidies,” Reinsch said in his commentary.

If both companies had to give back money as part of a settlement, big payments could be “fatal” for either company especially in a year when global travel is wrecked by the coronavirus pandemic, Reinsch added.

“Airbus did not start this WTO dispute, and we do not wish to continue the harm to the customers and suppliers of the aviation industry and to all other sectors impacted,” said Airbus CEO Guillaume Faury in a statement earlier in October.

The company remains “prepared and ready to support a negotiation process that leads to a fair settlement,” Faury said.

As many stress that dialogue is still key to halting any potential escalation of the dispute, experts believe that a full settlement may come later rather than sooner.

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