Industry News

Airbus Initiates Final Step to Settle 16-Year Long WTO Litigation

Aug. 8, 2020
By: Navpreet K. Moonga

In an effort to end the long-standing World Trade Organization (WTO) Civil Aviation dispute and imposition of U.S. retaliatory tariffs, Airbus has issued a statement agreeing to amend its Repayable Launch Investment (RLI) contracts.

The initial dispute arose in 2004 when the U.S. sought consultations with the European Union (EU) and Airbus host nations, Great Britain, France, Germany, and Spain, over alleged unfair subsidies being provided by government loans. The U.S. subsequently filed a complaint with the WTO against the EU, specifically alleging that the European Commission and EU Member States were providing subsidies to Airbus SE, inconsistent with their obligations under the Agreement on Subsidies and Countervailing Measures and the General Agreement on Tariffs and Trade (GATT 1994). The EU, in turn, filed a complaint against the U.S. with respect to alleged subsidies provided to Boeing.

After an intense battle, including various appeals, the Appellate Body of the WTO issued a decision in 2018, in favor of the U.S., finding that the EU and its Member States had not fulling complied with previous WTO rulings regarding Airbus’ RLI for its A350 and A380 aircraft. As a result of the EU’s continuing non-action to comply with the decision, in October 2019 the WTO awarded the U.S. the right to impose retaliatory tariffs worth $7.5 billion on EU exports. Consequently, the U.S. imposed 10% tariffs on most European manufactured Airbus aircrafts, and 25% duties on a variety of goods including, cheese, wine, olives, and single-malt whisky. The U.S. has since threatened to increase these tariffs and impose more tariffs on a broader selection of products.

Airbus’ attempt to settle this dispute by issuing its statement last month, comes at a time where the aviation industry in particular, has been affected by the COVID-19 global pandemic. Airbus CEO, Guillaume Faury, stated that their actions to comply at this stage were “a clear signal to support 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.” Regardless of the EU’s incentive to finally settle the dispute, the U.S. does not seem convinced that corrective measures have been taken by the EU. In a statement before the WTO Dispute Settlement Body on July 29, 2020, the U.S. was clear that the “EU ha[d] not provided any details of these supposed amendments to the WTO or directly to the United States.” Further, the U.S. stated that Airbus’ public announcement claiming to now comply with WTO requirements, is not normal practice to show compliance, as no explanation was provided.

Even with this “final step” in place by the EU, under the authorization issued by the WTO last year, the U.S. is neither required to lift the tariffs that have been imposed, nor is the U.S. prevented from imposing more tariffs. Therefore, it remains to be seen whether the U.S. will withdraw the retaliatory tariffs issued against the EU, or in fact, whether the EU will enforce its own tariffs against the U.S. in response.

If you have any questions or would like more information about U.S. trade with the EU, contact an attorney at Barnes, Richardson & Colburn LLP.