WTO affirms non-compliance in Airbus-WTO case; another appeal expected

Dec. 2, 2019, © Leeham News: Boeing and the US won another round at the World Trade Organization today when the compliance panel upheld a decision to impose tariffs on the European Union, including Airbus airplanes, in the 15-year trade dispute between the US and the EU.

The compliance panel did hand a minor win to Airbus and the EU by reducing the impact of “harm” to Boeing over the A380. Airbus argued that there should be no impact because the program is being terminated in 2021. In a partial victory, the WTO compliance panel agreed that the impact of the A380 is reduced with the decision to terminate the program in 2021.

But, according to a Reuters report, because the airplane continues to be delivered into 2021, the impact is not entirely eliminated.

Partial victory

Airbus declared partial victory, however. In a statement, the company wrote:

“A WTO panel assessing the measures the EU and Airbus have taken to comply with the WTO recommendations has issued its findings. As a result of the panel’s findings, the US should immediately reduce the $7.5bn in tariffs that the WTO authorized to the US in October by around $2bn. This is the direct result of the panel finding that the loans for the development of the A380 no longer have an impact on Boeing sales and that therefore the value of the lost sales no longer exists.”

Disputing the decision

The compliance panel, however, handed Airbus another defeat by affirming the A350 launch aid remains harmful and subject to some $5bn in tariffs. Airbus disagrees and so does the European Union.

“The panel also asserts that the amendments already made to the A350 loan agreements are not sufficient to fully align the loans with market conditions.  Based on these findings, Airbus would support to appeal this report, as per WTO rules,” Airbus said in a statement.

An appeal needs to be filed by the EU and it needs to be done within the next nine days.

The US government has blocked appointment of members to the appellant panel.

In response to a query by LNA over the weekend, Airbus emailed the following statement, which preceded the news above:

The situation with the WTO Appellate Body is, indeed, very problematic. By blocking the nomination of Appellate Body judges, the US would effectively block the WTO dispute settlement mechanism.

How this affects our two cases:

      • In the EU case against Boeing subsidies, we are waiting for the WTO arbitration panel decision, which authorises the EU to impose sanctions, in the spring (the equivalent of the $7.5bn authorization the US obtained in October). That decision is, in principle, not appealable. So the blocking of the Appellate Body will not have any direct consequences on that decision. However, if the US then decides to initiate a compliance panel (to assess any measures they would have taken to comply – something they have not even started doing), that compliance panel decision (in a year’s time) would be subject to appeal by both parties – and would then be blocked by this US decision not to appoint judges.
      • In the US case against the EU, the WTO second compliance panel decision will be made public today. That decision can be appealed by both parties. Today, however, the Appellate Body still has three judges, and therefore should still hear the appeal. But if the compliance decision had been made public at the end of December, there would no longer have been enough Appellate Body members to hear the appeal, and any appeal of that decision would have been blocked.
Dec. 11 deadline

After Dec. 11—a week from Wednesday—the three member Appellant panel won’t be able to accept new appeals, but it can continue to hear ones that were filed by then. This means the EU will have to file an immediate appeal of today’s compliance ruling. An appeal is expected.

On the WTO finding that Boeing and the US failed to cure illegal subsidies, the Arbitration panel’s decision on the amount involved is due next spring, likely in May or June. This decision can’t be appealed, but it can go to a Compliance panel which can review whether the US cured the subsidies.

Like today’s Compliance decision, next year’s compliant ruling may be appealed—provided the US allows new appointments to the appellant panel.

 

26 Comments on “WTO affirms non-compliance in Airbus-WTO case; another appeal expected

  1. Use the process when it suits you, block the process when it doesn’t. Equally, only allow appointments to the process that suits you.

    The behaviour goes back to the beginning of time. The pupose is to achieve absolute power over a process. Then you can do as you wish.

    It won’t fix Boeing’s problems. Will it give them time? The world will go away, which means Boeing will have absolute success domestically, but internationally there will slim pickings.

    Very sad!

  2. It would be a dismal world in which only Boeing was able to make airliners but that seems to be the situation we would have to accept without any loan guarantees to Airbus for development.

  3. “US President Donald Trump said at a Nato press conference on Tuesday: ‘We’re going to tax Airbus… that’s going to be very good for Boeing.'”

    How convenient at a time like this. US Airlines will be forced to buy only the 737MAX just like the Soviet Union Airlines were forced to buy the Soviet made planes back in the day. The only difference is the TU-154 is statistically much safer than the 737MAX8 right now.

    I’m going to miss the >18″ wide seats, the better takeoff performance/range (think about how many routes are going to be cut because the MAX9 needs 2,000ft more than the A321neo at MTOW to takeoff? Or services like B6’s planned transatlantic flights).

    But more important than my feelings is the thousands of US jobs going to be lost because of this. Think about all the people that build the planes (yes, some Airbus models have more US content than the 787), the pilots, flight attendants, and the list goes on.

    And please don’t tell me Boeing isn’t subsidized. You might want to look up what the most subsidized company in the world is.

    • It would be interesting. Airbus would increase A220, A320 & A321 deliveries to Europe and China, who can have earlier deliveries.

      Boeing could deliver 737MAX’s in large numbers to the lucky US airlines. Even stored ones, because Boeing exports would be reduced. Even Pratt & the Canadiens will be pissed.

      https://i.pinimg.com/originals/4b/70/d7/4b70d72241d7bf4163d3939859983b89.jpg

      A321 XLR ‘s will start crossing the Atlantic anyway, just not US owned ones.

    • I suspect it has at least partly to do with the MAX grounding, and the idea that it’s the EU that’s playing hardball blocking Boeing from selling it to the (rest of) the world.

    • The WTO reasoning in this article is bizarre.

      Airbus and Boeing often swap delivery slots to make them available for an important campaign. There were some A350 cancellations, opening slots.

      The 777 and 787 do not share commonality.

      • Agreed, just thought it was interesting.

        WTO itself is bizarre so it all fits nicely.

        • Look deeper. The US has subverted that system too in various places.

          ( ignore proclaimed objectives: look at what the deeds tell. Actually same as US activities in general or Peter Altmaier in Germany taking down Renewable Energy sources )

      • Agree Scott.

        Bizarre, clearly Virgin would prefer an older, heavier, less fuel efficient, more polluting 777 than waiting for the A350.

        They ordered A350s because that aircraft fits their requirements. Delivery slots change all the time as you say!

        Interesting precedent to set.

      • The latest United deal just proves Scott’s statement, 45 A350s deferred until 2027 !

      • “The 777 and 787 do not share commonality.”

        How can KLM airlines fly both the 777 & 787 with the same pilots with a common type rating?

  4. CNBC, Boeing is organising an expenses paid trip to the 737 plant for anylsts,etc.
    Scott has been off the list for a while apparently.

    • Maybe it’s aimed at floating the idea the MAX is safe, and Boeing has done all it can and certification is political now (EASA and the Chinese are playing hardball to hurt Boeing)
      I’ve seen an increase of comments on non aviation sites following this thought.

      Obviously Mr Hamilton wouldn’t fall for that.

    • Proving more accurate on Boeings situation than BCA Communications will get you off the pamperlist reserved for less knowledgeable half truth forwarders. Smart..

  5. Right wing parties in Europe are fueled by the perception that EU doesn’t work. Merkel & co have tried to protect the trade world from popularism. They are on their way out. Suspect EU leaders will soon be forced to copy Trump’s hard line if the EU is to survive. Maybe a tax on any product using US steel, as US steel is protected by illegal tarifs? Detroit workers lookout. US farmers might discover that loosing the Chinese market was just a start, esp as EU has other cases which they have already won. Then, a prohibition on EU banks lending money to foreign politicians could have interesting consequences. Anyway, if EU is to survive, its leaders will eventually be forced to follow China’s example.

    • Right wingers and other dissent groups in the EU get a lot of money and push from foreign interests. Typically US connected.
      Guess where the Nazi’s from Ukraine got their support.
      ( Biden and his son _are_ incriminated like McCain for the actions in Georgia. )

  6. Boeing can be happy that Airbus wasted much resources on the A380. Boeing had an advantage sticking to smaller planes and what did they make of it, nothing.

    I wonder how Virgin Atlantic are using their A350, which range, which seat configuration, how many pax.

    These WTO rulings won’t stop Airbus as could be seen in Dubai and yesterday with UA.
    I thought the EU could use tarifs too from many years ago and they didn’t use it?

    Thanks Scott, you have a great website.

      • Thanks JakDak,

        LHR-LOS = 3109mi
        LHR-JFK = 3442mi 3000nm
        LHR-SFO = 5354mi
        LHR-LAX = 5442mi
        LHR-JNB = 5637mi
        These distances are all below 5000nm, an A330-900 without center fuel tank could do easily, 335 pax too, just not as comfortable as an A350-1000 since its cabin is 7m longer.
        So Virgin Atlantic could have chosen the A330 too and not only the 777.

  7. The free cash flow, stock price days seem ages ago for Boeing.
    https://www.bloomberg.com/opinion/articles/2018-04-27/airbus-is-building-gliders-while-boeing-floats-on-cash

    I expect further more drastic protective initiatives from Washington. Right or wrong Boeing is a US strategic assett, too big to fail. Hundreds of thousands of jobs, the AirForce, space programs, civil aerospace are closely connected.

    Probably an independent commision of wise men/women will review the financial performance, reporting, Im-Ex bank, tax breaks, tanker, 787 deferred costs, incentives, stock holder value, FAA delegation, role of congress, public communication, lobbying, greed and political interferences over the last 20 years.

    The top would be replaced, as will company priorities, salary packages. Billions will be invested, the WTO/ EU put aside and a nice communication package developed to make it look like reasonable and fair for the tax payer.

  8. It’s too bad the World Trade Organization doesn’t consider low wages, paltry benefits, and the absence of collective bargaining agreements illegal subsidies.

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