US threatens trade sanctions against EU in Boeing-Airbus dispute

The six year-old trade dispute between the US and Europe over subsidies to Airbus is set to get more acrimonious after the US yesterday threatened to seek the World Trade Organization's (WTO) approval to impose trade sanctions on the European Union over aid for the Airbus A350 aircraft.

The US threat came after the EU refused to comply with an earlier WTO ruling on eliminating subsidies to Airbus, and the trade sanctions if approved, would amount to $7 billion to $10 billion annually.

While the WTO cannot force nations to stop illegal aid, it can impose sanctions for failure to comply with its rulings.

In June last year the WTO had ruled that the EU nations provided illegal subsidies to Airbus in the form of launch-aid loans, infrastructure support and equity infusions, to the detriment of rival Boeing. (See: Victory for Boeing as WTO rules Airbus subsidies unfair)

The 1,200-page ruling concluded that Airbus received subsidies in the form of loans from European governments at below-market interest rates to produce its six best-selling models. The trade panel recommended that steps be taken to withdraw the subsidies or nullify their effects by 1 December.

Although the EU said on 1 December that it has withdrawn the subsidies and complied with the WTO ruling, the US refuted those claims saying that EU has given new subsidiesto Airbus for the development and production of large civil aircraft.