Bloomberg News

U.S. Sanctions Request Over Airbus Aid Sent to Arbitrators

December 27, 2011

(Adds complaint history starting in second paragraph.)

Dec. 22 (Bloomberg) -- A U.S. request for the World Trade Organization to approve between $7 billion and $10 billion in retaliatory sanctions against the European Union for illegal subsidies to Airbus SAS has been referred to WTO arbitrators.

The referral came today after the EU objected to the level of counter-measures sought by the U.S. and asked for the matter to be referred to independent arbitration. WTO judges in Geneva concluded in June 2010 that Spain, the U.K., France and Germany had given billions of dollars in illegal subsidies to Airbus in the form of so-called launch aid, infrastructure support and equity infusions that had an adverse effect on Boeing Co.

While the 27-nation EU announced on Dec. 1 that it had complied with the ruling, U.S. Trade Representative Ron Kirk said a week later that the aid hadn’t ended.

The WTO can authorize sanctions for failure to comply with rulings, though it can’t force nations or companies to scrap illegal aid. Under WTO rules, the arbitrators have 60 days to make a decision.

A WTO panel found in March that Chicago-based Boeing received at least $5.3 billion in illegal U.S. support, unfairly tilting the $70 billion civil-aviation industry. Both the EU and U.S. appealed that ruling.

The two judgments together finding that both aircraft makers received illegal subsidies may establish industry- defining guidelines for government support that become even more important as competitors from China, Russia and Brazil emerge.

The U.S. and Europe filed counter-cases at the WTO in 2004 after the administration of President George W. Bush unilaterally walked out of a 1992 aircraft-aid accord with the EU. Boeing had lost its industry lead to Toulouse, France-based Airbus, a unit of European Aeronautic, Defence & Space Co., the previous year.

--Editors: Eddie Buckle, Patrick Henry

To contact the reporter on this story: Jennifer M. Freedman in Geneva at jfreedman@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net


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