US begins sanctions process in Airbus Dispute with EU

Posted on: 04/04/2012

The United States said on Friday that European governments had failed to end illegal subsidies for aircraft manufacturer Airbus and so will be taking the first step at the World Trade Organisation toward seeking sanctions on potentially $9.6billion worth of trade sanctions as part of a lengthy legal battle over aircraft subsidies. "We refuse to stand by while American businesses and workers are disadvantaged," US Trade Representative Ron Kirk said in a statement outlining Washington's intention to ask for WTO panel to judge whether the European Union has complied with an earlier WTO ruling against government programs for Airbus.

EU trade spokesman John Clancy expressed disappointment in the U.S. move and pointed the finger at the U.S. for not confirming its compliance with WTO obligations in the case of Boeing.  "We regret that the US has chosen to take this step, since the EU notified its compliance with its WTO obligations in the package of steps taken at the end of 2011, and the US has yet to do the same in the Boeing case."  When choosing which products to tax, America will target those goods it thinks will do the most damage to European economies – meaning a heavy burden could fall onto Britain’s exports.

The EU says it has fully complied with the WTO decision from last June, but the U.S. disputes those claims and is asking the global trade body to set up a panel to decide the matter.  "The European Union's aircraft subsidies have cost American aerospace companies tens of billions of dollars in lost revenue, which has cost American workers their jobs and hurt their families and communities," Kirk said.

The U.S. and EU have waged a seven-year proxy war on behalf of the world's dominant plane makers, and the WTO has found that the governments provide billions of dollars in unfair support to Airbus, a unit of European Aeronautic Defence & Space Co. and U.S.-based Boeing Co.  Now the governments, which also support the aircraft companies through military contracts, are jockeying over how to comply with the subsidy rulings.

Many experts expect the final outcome to be a negotiated settlement, and some note the U.S. appears to have the upper hand, given that Airbus, which is partly government owned, has emerged as the more heavily subsidized. Last May, the WTO found that European countries had given Airbus about $18 billion in illegal launch aid, while the Boeing ruling turned up closer to $4 billion in unfair subsidies.

The United States will formally submit its request at an April 13th meeting of the WTO Dispute Settlement Body.But, because the appeal process, which involves a panel of judges in the WTO, is so drawn-out, the earliest sanctions could be in place is early 2013

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