By Bjorn Fehrm
July 30, 2020, ©. Leeham News: Airbus CEO Guillaume Faury announced Friday that it had made the A350 Repayable Launch Investment (RLI) loans fully WTO compliant, to break the deadlock in the 16-year-old fight with Boeing over state subsidies to their airliner industries. The claim was reiterated today during the Airbus second-quarter earnings call.
“We have fully complied with all the WTO requirements. These additional amendments to the A350 RLIs demonstrate that Airbus has left no stone unturned to find a way towards a solution,” said Faury. “This is a clear signal of support to those who are suffering from the severe impact of the tariffs imposed by the USTR, especially at a time when industries are hard hit by the consequences of the COVID-19 crisis.”
The WTO concluded in October 2019 that the RLIs for the A380 and A350 were not given on commercial terms. Hence, the US had the right to apply annual custom tariffs on $7.5bn of goods imported from the EU.
The US Trade Responsible (USTR) put a 10% import tax on Airbus airliners and 25% on French wine, Spanish Olive oil, and Scotch whiskey. The tariffs on non-Airbus products are designed so these industries pressure the EU to lean on Airbus to fix its problems with Boeing. The US upped the Airbus tariff to 15%. Coincidentally, this is when the COVID crisis hit the global economy and aircraft deliveries to US customers all but dried up.
Airbus has similar claims against Boeing that WTO should have decided on in May-June. With both parties being in non-compliance, it should force Boeing to a negotiated settlement. The WTO delayed the decision to September-October due to COVID-19.
Industry experts question why Airbus moves on the conditions for the A350 RLI now. The A380 RLI non-compliance is still unsolved until 2021 when production finally ends. This stops any impediment to Boeing of the A380, according to WTO rules.
With the A380 impediment active, there will be little incentive for the US part to lower their pressure, even though Airbus says the A350 is now in full compliance with WTO rules. The WTO has to affirm the Airbus interpretation.
The only thing that can change the situation, says the same experts, is a WTO ruling giving the EU the right to apply tariffs on Boeing aircraft and other goods going to Europe. And as said, any such ruling is two to three months out.
So why this move from Airbus at this time? Could it be to show the tariff stricken other European industries that Airbus has done what it can and the US is playing foul if it doesn’t stop the tariffs?
The WTO dispute is 16-17 years old and is only be solved when the parties exert enough pressure on each other that a negotiated solution is necessary.
With the airline industry and the OEMs reeling from the COVID-19 pandemic, it would make sense to sit down and talk. It’s unlikely to happen under a Trump Administration, which has been feuding with the European Union and which made the Airbus case one of its signature trade issues.