Airbus Amends State Loan Agreements In Bid To End Dispute With US Over Subsidies

European aircraft manufacturer Airbus said on Friday that it will eliminate subsidies in an attempt to resolve a long-running conflict with the U.S. over government aid to the planemaker.

The subsidies had already been assessed as illegal by the World Trade Organization.

Specifically, Airbus said it will amend certain “launch aid arrangements” it received from the governments of France and Spain. Essentially, Airbus has agreed to pay higher interest rates on these state loans.

These loans were granted to Airbus to develop its A350 jet, which went into service in 2015.

The WTO had earlier determined that these “arrangements” – a form of state-approved financial assistance to help manufacturers create new models -- were a subsidy.

The U.S. has long charged such state aid to European manufacturers were illegal.

Now Airbus said it will “amend the French and Spanish [launch aid] contracts to what the WTO considers the appropriate interest rate and risk assessment benchmarks… With this final move, Airbus considers itself in complete compliance with all WTO rulings.”

Last year, WTO approved U.S. sanctions on up to $7.5 billion of European goods in retaliation for Airbus’ failure to withdraw its subsidies.

Airbus added: “After 16 years of litigation at the World Trade Organization, this is the final step to stop the longstanding dispute and removes any justification for U.S. tariffs. The tariffs imposed by the United States Trade Representative are currently harming all targeted industry sectors, including U.S. airlines, and are adding to a very difficult environment as a consequence of the COVID-19 crisis.”

Airbus CEO Guillaume Faury said his company “has left no stone unturned to find a way towards a solution. We have fully complied with all the WTO requirements.”

The European Union applauded Airbus’ decision.

Phil Hogan, EU trade commissioner, said the removal of subsidies by Airbus should prompt the U.S. to eliminate its tariffs on EU goods.

“Unjustified tariffs on European products are not acceptable and, arising from the compliance in the Airbus case, we insist that the United States lifts these unjustified tariffs immediately,” Hogan said.

Concurrently, the EU has a similar action at the WTO against U.S. state support for planemaker Boeing (BA) -- a decision on that issue is expected in September. The WTO is expected to specify how much the EU can retaliate by imposing its own tariffs of U.S. goods.

“In the absence of a settlement, the EU will be ready to fully avail itself of its own sanction rights,” Hogan warned.

Bruno Le Maire, France’s economy minister, also warned that Brussels will retaliate against the Americans.

“We are determined to uphold our rights,” he said. “If the U.S. continues to refuse a friendly negotiation, the EU will have no other choice than to adopt tariff sanctions.”