AIR Airbus SE

By Doug Cameron and Daniel Michaels 

The World Trade Organization on Tuesday said the European Union may impose tariffs on $3.99 billion in Boeing Co. jets and other U.S. goods annually as part of a long-running trade dispute.

The ruling clears the way for the EU to respond to tariffs that the trade body last October authorized the U.S. to impose on $7.5 billion in Airbus SE jets and other imported European products. In 2004, Washington took European countries to the WTO over subsidies to Airbus, and Europe responded soon after with a case against U.S. support for Boeing.

WTO rulings since then have found that both sides provided prohibited subsidies, but Europe did so to a greater extent.

EU officials have said they hope to negotiate a settlement with Washington, and many observers expect Europe to refrain from levying tariffs quickly. The EU last year said it had prepared a preliminary list of U.S. products to target for retaliation, if necessary.

EU Trade Commissioner Valdis Dombrovskis said on Twitter that he "will immediately re-engage with the U.S. in a positive and constructive manner to decide on next steps. Our strong preference is for a negotiated settlement. Otherwise, we will be forced to defend our interests & respond in a proportionate way."

Airbus said it supports any action the EU takes. The company is "ready to support a negotiation process that leads to a fair settlement," said Chief Executive Guillaume Faury. "It is time to find a solution now so that tariffs can be removed on both sides of the Atlantic."

The office of the U.S. Trade Representative didn't immediately respond to a request for comment.

Boeing said it is disappointed that Airbus and the EU are seeking tariffs on the U.S. "Rather than escalating this matter with threats to U.S. businesses and their European customers, Airbus and the EU should be focusing their energies on good-faith efforts to resolve this long-running dispute," the company said.

Helping broker a deal over government aid for jetliners would be a crucial victory for the WTO's efforts to build credibility as a global arbitrator, even as the coronavirus pandemic amplifies already-simmering trade spats. The 16-year jetliner dispute is the longest in WTO history.

The U.S. last year introduced a 15% tariff on imported Airbus jets and levies on other European products, following the largest arbitration award in WTO history, according to the U.S. Trade Representative. The EU could follow suit with levies on Boeing planes if no deal can be reached.

The pandemic-driven decline in air travel has made many airlines unwilling or unable to take most new aircraft deliveries, reducing the current and potential impact.

Both sides have taken steps in recent months to defuse a dispute that started in October 2004 and centers on government aid aimed at assisting the launch of new jets such as the Boeing 787 and Airbus A350 and A380.

The dispute spawned a series of claims, WTO rulings, concessions and appeals that have colored broader trade relations between the U.S. and the EU and led to tariffs on goods ranging from cheese to industrial parts.

Boeing earlier this year stepped away from tax breaks provided by Washington state for 787 production. The company recently said it planned to end assembly of the plane in the state and move it to South Carolina. Airbus announced a deal in July with Spain and France to change some financial-support agreements.

Both sides now maintain they are in full compliance with WTO guidelines.

The dispute over aircraft subsidies has become an element of the Trump administration's trade negotiations with Europe. The two sides have been in formal negotiations since 2018 over a range of issues but have made little progress.

Write to Doug Cameron at doug.cameron@wsj.com and Daniel Michaels at daniel.michaels@wsj.com

(END) Dow Jones Newswires

October 13, 2020 11:02 ET (15:02 GMT)

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