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WTO rules Europe illegally subsidized airlines, handing victory to Obama administration ahead of trade fight

An Airbus A320neo plane with the logo of German airline Lufthansa stands on the factory site of Airbus on February 12, 2016 in Hamburg, Germany. (Lukas Schulze/DPA/AFP/Getty Images)

The World Trade Organization ruled Thursday that the European Union and several of its members failed to end illegal subsidies for airline giant Airbus, a victory for the United States in what has become the most expensive dispute in international trade history.

Those subsidies, which the WTO had ordered European nations to halt in 2011, total $22 billion over more than a decade. They have cost the U.S. economy tens of billions of dollars in would-be exports. They have cost Chicago-based Boeing, America's largest manufacturer of commercial aircraft, nearly 400 potential aircraft sales and market share around the world in 2012 and 2013 alone, according to the WTO.

The WTO, the body that governs international trade, is still weighing a counter-complaint from Europe, over whether the United States has illegally subsidized Boeing.

Thursday's ruling carries no punishment, and the Europeans could appeal. But it appears to set the stage for the United States to begin considering retaliation against Europe in the airline market, possibly with tariffs.

The Obama administration touted the long-awaited ruling as a major win for its trade strategy, in a year when free trade has become a punching bag for both candidates for president, particularly Republican Donald Trump, and as the administration mounts a final-hours effort to win congressional approval for a proposed 12-nation trade pact known as the Trans-Pacific Partnership.

The administration has also filed two new trade cases with the WTO against China in an effort to demonstrate its commitment to enforce trade violations, with the hope of persuading wavering members of Congress to back the TPP in a possible vote after the presidential election.

“This report is a sweeping victory for the United States and its aerospace workers,” U.S. Trade Representative Michael Froman said in a statement. “We have long maintained that EU aircraft subsidies have cost American companies tens of billions of dollars in lost revenue, which this report clearly proves. We will not tolerate our trading partners ignoring the rules at the expense of American workers and their families.”

Froman asked the European Union, along with France, Germany, Spain and Britain, to end the subsidies immediately.

Boeing also hailed the decision. “Today’s historic ruling finally holds the EU and Airbus to account for their flouting of global trade rules,” said Dennis A. Muilenburg, Boeing's chairman, president and chief executive.

Parts of the dispute over aircraft aid stretch back 40 years, as long as European nations have aided Airbus. The United States first complained to the WTO about the subsidies in 2004. In 2011, a WTO panel ruled, in a partial victory for the United States, that many of the subsidies were illegal under its rules for international trade. European nations said in late 2011 that they ended the subsidies, but the United States disagreed and asked the WTO to reconsider the matter.