United States set to ramp up aircraft trade war

Boeing and US goverment to demand EU be punished with sanctions over Airbus subsidies

The United States will inflame the long-running trade dispute between aircraft manufacturers Boeing and Airbus by demanding that the World Trade Organisation look to impose annual sanctions of up to $10bn (£6.3bn) against the EU.

Since 2005, the US and EU have issued claim and counter-claim that the other has provided their aeroplane producers with illegal subsidies. On Wednesday, the four parties are expected to receive the WTO's decision on the US's appeal against last year's finding that Boeing had been granted illegal subsidies of at least $5.3bn between 1989 and 2006.

Whatever the result, the US government and Boeing are determined to push forward their claim, arguing that countries where Airbus is based – France, Germany, Spain and the UK, where 15,000 people are employed in Bristol and North Wales to build wings – are still providing the manufacturer with forms of preferential loans. This would go against the terms of another WTO verdict.

The US is particularly anxious over the A350, a passenger jet that is under development and is receiving record-breaking orders from airlines and governments around the world.

The US has called for sanctions which would not necessarily be against aircraft, but could be on anything the EU produces from French cheese to British meat. In the next few weeks, the US will ask the WTO to establish a panel of three independent experts from countries which are relatively unaffected by the dispute – previously, panels have been comprised of South Americans – to look into whether the EU has continued to provide illegal subsidies.

However, the EU and, Airbus parent company, EADS are understood to have prepared yet another case should the US push through with its plan. This will focus on several US programmes involving Boeing, including an announcement by President Barack Obama earlier this month to re-authorise the Export-Import Bank to help the manufacturer and others secure sales abroad.

These two filings, which could take the form of new cases or extensions to the latest claims, could mean that the trade fight is not resolved until 2018, 13 years after Boeing made the original claim. This would make it the longest-running dispute in WTO history, and is almost certain to occur as each side have privately vowed to appeal any findings that do not go their way.

EADS is known to be keen that the dispute is settled through peace talks as soon as possible, as it fears that other manufacturers from countries such as China and Russia will emerge and break the duopoly while they spend hundreds of millions of dollars fighting each other. However, Boeing sees the matter as a point of principle, believing that EU subsidies have helped Airbus claim more aircraft orders in recent years.

The appeal decision, that arrives this week, will not be made public until at least next month. The parties are under strict instructions to keep the findings private and are given time to redact any information that they consider to be commercially sensitive.