If you’re in the market for a brand new Airbus A350 long-haul aircraft, normally valued at a list price of a cool $317 million, and you happen to be based in the United States then expect to pay a lot more for your new toy. And that’s because yesterday, the World Trade Organisation (WTO) sided with the U.S. government in its dispute with the European Union over illegal subsidies to aerospace giant Airbus.
The WTO ruling has paved the way for the U.S. to start imposing annual tariffs worth $7.5 billion annually on European goods – including a 10 per cent premium on Airbus products bought by US-based companies. The worst affected airline is likely to be Atlanta-based Delta Air Lines which has outstanding orders for over 250 Airbus planes.
“For years, Europe has been providing massive subsidies to Airbus that have seriously injured the U.S. aerospace industry and our workers,” said U.S. Trade Representative Robert Lighthize in announcing the historic win.
“Finally, after 15 years of litigation, the WTO has confirmed that the United States is entitled to impose countermeasures in response to the EU’s illegal subsidies,” he continued. The WTO ruling is the largest award in the organisation’s history and the U.S. is set to start imposing the tariffs from October 18.
Lighthize said it would now seek to enter into new negotiations with the European Union.
Unsurprisingly, Airbus has called for talks in a bid to ease “trade tensions” but has warned that the EU is likely to retaliate with similar tariffs imposed on Boeing-produced aircraft. The WTO is expected to announce what tariff countermeasures the EU can impose on US products within the next few months.
While the U.S. government claims Airbus has received illegally cheap loans from the governments of France, Germany, Spain, and the United Kingdom, the EU believes a number of US States have offered Boeing illegal subsidies as well.
Rather than harming the U.S. economy and American workers, Airbus argues it has long supported industry in the country. The pan-European aerospace company claims to have bought $48 billion of components and materials from American suppliers in the last three years alone, and to support in excess of 275,000 American jobs.
Along with a major aircraft manufacturing facility in Mobile, Alabama, there are also Airbus facilities in Kansas, Florida and Colorado.
The new tariffs could also cause new problems for Airbus’ 100-150 seater A220 range of single-aisle aircraft. Previously known as the Bombardier C-Series, Airbus took a 50.1 per cent stake in the aircraft to avoid a near 300 per cent tariff that the U.S. had threatened to impose on the plane. In that case, the U.S. argued that Bombardier had received illegal state aid from the Canadian government.
Along with new planes, a whole range of other products are subject to even bigger import levies. Single-malt Irish and Scotch whiskies will be subject to a 25 per cent tariff, as will microwave ovens from Germany. European cheeses, olives and wine are also set to get a lot more expensive for US consumers as well.