WTO to back U.S. tariffs over Airbus subsidies

[October 02, 2019]  By Philip Blenkinsop and Tim Hepher

BRUSSELS/LONDON (Reuters) - The World Trade Organization is poised on Wednesday to open the door to hefty U.S. tariffs on European goods over illegal subsidies for Airbus, pushing a 15-year-old row over support for plane giants to the center of fraught global trade relations.

The Geneva body said it would publish at 4 p.m. local time (1400 GMT) its decision on a U.S. request to impose up to $11.2 billion in tariffs on European Union goods, but people close to the case expect WTO arbiters to reduce that by about a third.

The WTO has found that both Europe's Airbus <AIR.PA> and its U.S. rival Boeing <BA.N> received billions of dollars of illegal subsidies in a pair of cases dating back to 2004. Both cases are expected to lead to tariffs, deepening transatlantic trade tensions.

A three-person WTO arbitration tribunal is expected to announce that the United States suffered harm equivalent to roughly $7.5 billion a year from discounted European government loans for the Airbus A350 and A380 passenger jets - a decision that would allow Washington to hit goods worth the same amount.

The focus of nervous global financial markets will then shift to Washington where the U.S. Trade Representative is expected to move quickly to narrow down a preliminary list of goods in line for tariffs.

The agency's provisional list of products that are eligible to be targeted covers goods with an annual trade value of $25 billion and ranges from Airbus jets themselves to helicopters, wine, handbags and cheese.

Before any tariffs are imposed, the WTO's Dispute Settlement Body must formally adopt the arbiters' report in a process expected to take between 10 days and 4 weeks.

Its next scheduled meeting is on Oct. 28, but Washington could request a special meeting 10 days after the arbiters' report is published, suggesting an earliest possible final nod on Oct. 12.
 

An Airbus A350 takes off at the aircraft builder's headquarters in Colomiers near Toulouse, France, September 27, 2019. REUTERS/Regis Duvignau/File Photo

The WTO's decision on EU retaliation rights related to Boeing subsidies is expected early in 2020.

On Tuesday, the head of Irish budget airlines group Ryanair <RYA.I> urged the United States and EU to pull back from the brink of a tariff war and said neither side's aviation industry would survive a long dispute.

Importers led by U.S. airlines that buy Airbus jets have urged Washington to be selective when choosing industries to hit in order to avoid causing collateral damage to the U.S. economy.

Signs that the record corporate trade dispute involving Airbus and Boeing - the largest case ever handled by the WTO - is reaching a climax after years of arcane headlines and thousands of pages of rulings have weighed on European shares.

On Wednesday, European stocks <.STOXX> were already sharply lower ahead of the WTO decision after hitting their lowest in four weeks amid fears about the deteriorating global economy.

Sectors most sensitive to global trade and exports from luxury goods to mining companies <.SXPP> bore the brunt of the sell-off, with Gucci-owner Kering <PRTP.PA> and Hermes <HRMS.PA> down more than 2%. Airbus fell 1.1%

Makers of high-end handbags and accessories have also been under pressure due to the violent protests in Hong Kong.

(Additional reporting by Stephanie Nebahay in Geneva, Jospehine Mason in London, Writing by Tim Hepher, Philip Blenkinsop; Editing by Mark Potter)

[© 2019 Thomson Reuters. All rights reserved.]

Copyright 2019 Reuters. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.  Thompson Reuters is solely responsible for this content.