European Union still providing illegal subsidies to Airbus

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The World Trade Organisation ruled today that the European Union paid billions of dollars in illegal subsidies to Airbus.

European Trade Commissioner Cecilia Malmstroem insisted that the ruling also rejected "the vast majority" of United States claims against it, while saying in a statement that the bloc "will now take swift action to ensure it is fully in line with the WTO's final decision in this case".

According to the European Commission (EC), the WTO has determined "the majority of EU support to Airbus challenged by the USA had expired in 2011" and the EU is not required to take any further action regarding state support for the A300, A310, A320 and A330/A340 aircraft models.

The WTO has yet to rule on a related case charging that tax breaks by the USA state of Washington - where most Boeing manufacturing facilities are located - amounted to an illegal subsidy, the release said.

Shares of Airbus reversed earlier gains to trade down as much as 1.8 percent immediately after the ruling was published.

Boeing states that the authorised tariffs are likely to total billions in duties per year, unless and until Airbus addresses the illegal subsidies it received from European governments for its most recently launched airplanes.

The move means that the United States, under WTO rules, can ask an arbitrator to determine the level of retaliation it can seek against the European bloc as a result of its failure to comply.

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"It is long past time for the European Union to end these subsidies", he said.

It has been predicted that the tarrifa of Boeing could reach billions of dollars a year starting as early as 2019.

The CEO of Airbus, Tom Enders said, "Today's report is really only half the story".

Barring a settlement, both sides are expected to push for billions of dollars in sanctions annually, but the amounts will depend on arbitration, expected to take around a year. Airbus also notes that Boeing is reportedly seeking further illegal tax breaks for the planned construction of the mid-sized B797 aircraft. Of these, $9 billion are involved in the outstanding A350 and A380 claims. Boeing has estimated that it suffered commercial damages worth between US$7 billion and US$10 billion as a result.

Bob Novick, a legal counsel for Boeing, told reporters that the subsidies led to lost sales and that the United States will be free to decide over the next several months what European products will be targeted for tariffs to apply maximum pressure to ensure compliance.

Both companies have cut output of four-engined A380s and 747s due to airlines' preference for smaller models and Boeing has long said the industry's behemoths have had their day. "Significantly, it dismissed the vast majority of the US claims that this support had damaged Boeing's aircraft sales". It is anticipated that US tariffs will be authorized up to the amount of annual harm the subsidies are determined to cause.

"Companies should not have to compete with governments - that is what this case is about", said Robert Novick, co-managing partner at Boeing's trade lawyers WilmerHale.

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