One of longest-running and most bitterly contested trade disputes came to a head yesterday after the World Trade Organisation (WTO) ruled that the EU illegally paid Airbus $18bn (£13.3bn) in subsidies, paving the way for retaliatory tariffs from the US.
US trade representative Robert Lighthizer said: "Unless the EU finally takes action to stop breaking the rules and harming US interests, the United States will have to move forward with countermeasures on EU products."
The WTO dismissed the appeal from Airbus in its marathon spat with US rival Boeing, both of which have accused each other of receiving illegal subsidies.
The WTO said that the EU and four of its member states had provided $18bn in illegal state aid to the European aircraft maker to help launch the world’s largest airliner, the A380, and its new long-haul model the A350.
Airbus currently has a case pending at the WTO accusing the US of providing illegal support for Boeing.
The two companies have been locked in a cycle of appeals and rulings for 14 years.
Boeing hailed the “landmark ruling” from the WTO and said that the decision cleared the way for tariffs against European imports to the US.
It said that tariffs could be in place as early as 2019 and were expected to be the largest-ever WTO authorisation of retaliatory tariffs.
Boeing chairman and chief executive officer (CEO) Dennis Muilenburg said yesterday: "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.”
Airbus CEO Tom Enders hit back saying that the ruling yesterday was “only half the story”.
“The other half coming out later this year will rule strongly on Boeing’s subsidies and we’ll see then where the balance lies,” he said.
“Despite Boeing’s rhetoric, it is clear that their position today is straightforward healthy: they have half the market and a full order book, they have clearly not been damaged,” he added.
Howard Wheeldon, an independent aerospace analyst said that despite the fiery rhetoric he anticipated a negotiated settlement.
“The Airbus case against Boeing is yet to come. The end game will be about negotiation, arbitration and hopefully, common sense,” he said.
Airbus shares fell by 0.85 per cent after the WTO ruling while at the time of writing Boeing shares had climbed by nearly two per cent.
In January Canadian plane maker Bombardier escaped a punishing 300 per cent duty on sales of its C-series aircraft in the US which Boeing had said received an illegal subsidy from the UK and Canada.
In the end, US regulators overturned the initial decision by the US Department of Commerce, potentially saving thousands of UK jobs.