US offer to EU: we will remove tariffs if Airbus repays billions | Aviation News

The United States has offered to settle an aircraft subsidy dispute with the EU if Airbus repays billions in aid, Reuters reports.

The United States has proposed to settle a long-standing aircraft subsidy dispute with the European Union and to remove tariffs on wine, whiskey and other products if Airbus pays back billions of dollars in aid to European governments, several sources familiar with the matter told Reuters news agency. .

The offer was made by U.S. Trade Representative (USTR) Robert Lighthizer days before the World Trade Organization (WTO) released a report on Tuesday allowing Brussels to impose counter-tariffs on U.S. goods in the United States. to the detriment of subsidies to aircraft manufacturer Boeing.

Lighthizer’s proposal, however, is unlikely to win support from the EU, which appears poised to ask the WTO at an October 26 meeting to approve $ 4 billion in tariffs from the EU. EU on US products. The imposition of US $ 7.5 billion in US tariffs on Airbus subsidies has already started to hit European products.

The European Commission has confirmed that it has received what it described as the US’s first response to its own July proposal to end the dispute.

“This is the first time that we have received comments from the United States on some substantive aspects of our proposal. We have now provided our reaction and are ready to continue these discussions, ”said a spokesperson for the committee.

The USTR office, which said earlier this week it was awaiting responses from the EU on an unspecified offer, did not immediately respond to a request for comment.

Airbus shares were down 3.3% at 12:14 GMT, extending earlier losses.

WTO decision

The WTO ruled that European government loans to Airbus were unfairly subsidized by low interest rates while Boeing received unfair support in the form of tax breaks. Both sides say they have remedied past flaws and are now in compliance with WTO rules.

The loans are at the center of a 16-year dispute that is disrupting trade relations in sectors ranging from luxury goods to agriculture as the two countries seek to punish aircraft subsidies with tariffs.

The Airbus logo is pictured at the entrance to the company’s facilities in Bouguenais, near Nantes, France [File: Stephane Mahe/Reuters]

As part of the US offer, interest rates on past loans to support Airbus development programs would be reset to a level that assumes only half of the projects would go through, two of the sources said. expressing on condition of anonymity.

This would imply a higher risk that Airbus partner countries – Britain, France, Germany and Spain – have traditionally incorporated loans and reflects a type of speculative investment.

Such a price revision could cost Airbus up to $ 10 billion, which is considered unacceptable by the EU at a time when aircraft manufacturers are seeking funds to survive the coronavirus crisis.

An EU source called the US proposal “insulting” and said it could speed up the tariff war. An American source, meanwhile, said Lighthizer was “serious” about asking Airbus to repay the aid.

Scrambling for a job

Analysts say the US and the EU are trying to strengthen their positions ahead of any future negotiations. The two sides called for negotiations while accusing the other of refusing to seriously engage.

The repayment of old subsidies is one of the thorniest subjects of discussions because the WTO’s appeals are often turned towards the future. The committee said its proposals covered future aid to the sector.

The United States argues that simply addressing future types of support would not resolve the continuing damage to Boeing by the presence on Airbus’ balance sheet of past loans that it can still use to develop jets and offer unfairly low prices.

Jamieson Greer, former chief of staff at Lighthizer and now a partner at law firm King & Spaulding, said any deal must involve some form of subsidy repayment by Airbus.

“(Lighthizer) has been very public on the basic premise that… some form of rendition is an important part of any resolution,” said Greer.

European sources say Boeing would also have to make billions if the same philosophy were applied to the American aircraft manufacturer.

Currently, Airbus only repays public loans when its sales exceed a certain threshold, while loans for low-sales aircraft such as the A380 superjumbo can be partially or fully canceled.

Airbus says the disputed system favors taxpayers, as loan repayments on successful planes such as the A320 far exceed amounts written off on planes that fall short of sales targets.

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