WTO reiterates ruling against EU subsidies for Airbus

The World Trade Organization (WTO) on Tuesday upheld its decision that the European Union (EU) and four of its member states -- France, Germany, Spain and the United Kingdom -- failed to comply with an earlier WTO ruling, by maintaining illegal subsidies for aircraft maker Airbus.

WTO's Appellate Body on Tuesday upheld an earlier compliance panel finding that EU "launch aid" support provided to Airbus was a cause of significant lost sales for competing U.S. aircraft manufacturer Boeing in the twin-aisle and very large aircraft markets.

The Appellate Body also ruled that Airbus paid a below-market interest rate on financing for the development of its latest aircraft, the A350XWB, and that this below-cost financing provided by the French, German, Spanish and UK governments conferred a benefit on Airbus and constituted illegal subsidies.

WTO's ruling on EU's failure to comply with its prior recommendations may trigger U.S. retaliatory sanctions, whose level would be determined by WTO arbitrators.

"Today's final ruling sends a clear message: disregard for the rules and illegal subsidies is not tolerated. The commercial success of products and services should be driven by their merits and not by market-distorting actions," said Boeing chairman, president and CEO Dennis Muilenburg in a statement.

Boeing and Airbus have been in a trade battle since more than a decade ago. Each company accuses the other of taking billions of illegal state aid.

The United States requested consultations with the EU in October 2004, targeting "launch aid" as well as other forms of support provided for Airbus.

For its part, the EU also requested the WTO to establish a panel to probe the alleged U.S. subsidies of up to 19.1 billion U.S. dollars through tax and non-tax incentives by various municipalities to its largest aircraft maker Boeing in January 2006.