USA offers tariff truce if Airbus repays billions in aid, say sources

U.S. offers to settle long-running aircraft-subsidy dispute if Airbus repays billions in European aid: sources

On October 13, 2020 the World Trade Organization (WTO) issued its latest ruling in the long-standing Boeing-Airbus dispute, granting the European Union the authority to impose compensatory tariffs totaling up to US$4 billion on United States goods in response to allegedly illegal subsidies provided to Boeing.

This week the World Trade Organization allows the EU to respond to the charges imposed by Washington following a similar ruling last October, under which the United States won the right tariffs .5 7.5 billion EU goods, This affected aircraft parts and luxury goods based on the European Government's objections to the rival space team Airbus.

Earlier in the week, the WTO granted the EU the right to respond to the largest arbitration award in the history of the trade body which allowed the United States to impose tariffs totalling $7.5 billion on Airbus SE jets and some other European imports last October. The imposition of $7.5 billion of USA tariffs over Airbus subsidies has already started to hit European goods.

Under the USA offer, interest rates on past loans to support Airbus development programs would be reset, according to sources who spoke on the condition of anonymity. But Brussels has bristled at the truce offer and instead is plotting to retaliate with £3.11bn worth of tariffs on imports from the US. Both sides say they have remedied past flaws and are in line with WTO rules now.

The offer is not likely to fly with the E.U. One European source called the USA proposal "insulting". A USA source, meanwhile, said Lighthizer was "serious" about getting Airbus to repay aid.

"While trade tensions between U.S. and European Union are complex, with serious issues on both sides, punitive tariffs cause irreparable harm to companies of all sizes and weaken their entire supply chains, at a time when growth and job creation are most needed".

Repaying old subsidies is one of the thorniest topics in the discussions because WTO remedies are often forward-looking.

The United States argues that cheap loans have a lasting benefit to Airbus by leaving billions on its books, which it can use to develop jets and offer lower prices than otherwise possible.

Jamieson Greer, former chief of staff to Lighthizer and now a partner with law firm King & Spalding, said that any deal must involve some form of subsidy payback by Airbus.

Currently Airbus repays government loans only when its sales exceed a certain threshold, while loans for weak-selling planes such as the A380 superjumbo can be waived partly or fully.

"The US is determined to find a resolution to this dispute that addresses the massive subsidies European governments have provided to Airbus and the harm to US aerospace workers and businesses", Lighthizer said.

Airbus says the disputed loan system favours taxpayers because loan repayments on successful planes such as the A320 far outweigh amounts written off on jets that failed to reach sales targets.

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