WTO gives fresh verdict on EU-US battle on aircraft titans

31st March 2011, Comments 0 comments

The WTO will on Thursday publish its verdict on US state support for Boeing, a key part of a multibillion dollar trade battle between the EU and the United States over their dominant aircraft makers.

The world's two big trading powers have avoided commenting in detail on the outcome so far but both Airbus and Boeing have claimed victory on what is widely expected to be a split ruling that partly upholds the EU's complaint.

The World Trade Organization handed over the ruling, which follows a similar verdict on a rival US complaint on state subidies for Airbus last year, to US and European Union authorities on January 31, but with a confidentiality clause that expires on Thursday.

Both sides were expected to lodge appeals afterwards, industry sources said on Thursday.

Airbus, part of the European Aeronautics Defence and Space Company (EADS), estimated that illicit US subsidies of at least $5 billion caused $45 billion of lost civil airliner sales between 2001 and 2006.

It claimed that the complex ruling vindicated its complaint that Boeing received illicit subsidies or tax breaks of about $5 billion, sometimes under the guise of defence or space contracts, helping the US giant develop top-selling civil airliners such as the new 787 "Dreamliner".

"Despite years of challenges seeking to reduce the subsidies or state aid given by US states... the result will play in the European's favour," the company said in a statement.

Boeing acknowledged that some of the EU's complaint might be upheld when the ruling is published on Thursday.

"We expect the WTO will confirm that just a fraction of the R&D (research and development) programmes challenged by the European Union benefited from impermissible subsidies that had not previously been brought into compliance with international rules," Boeing spokesman Charlie Miller said.

"The total is expected to be less than $3.0 billion," he added in a statement e-mailed to AFP on Wednesday.

Pointing to media reports, Miller said it was "clear that the WTO has rejected the vast majority of the EU's claims."

Since a 1992 trans-atlantic no-fire agreement over the rival aircraft makers unravelled in 2004, Brussels and Washington have also been locked in a parallel dispute launched by the United States against European subsidies for Airbus.

A WTO ruling last June partially upheld Washington's complaint in that dispute and both sides have already lodged appeals.

It accepted three out of seven claims by Washington that Airbus effectively received export subsidies, which are illegal under WTO rules.

Boeing said Wednesday that the 2010 ruling faulted $1.5 billion in European R&D subsidies, $1.7 billion in infrastructure subsidies, and $2.2 billion in equity infusions, plus launch aid.

"Comparing the two decisions will reveal a market heavily distorted by illegal subsidies to Airbus, which has enjoyed a huge market advantage for decades," Miller claimed.

Analysts believe both sides will be faulted to some degree, obliging them to restructure some state financing and strike another agreement to end the dispute after a lengthy battle.

Executives have suggested that the WTO rulings would nonetheless help draw a red line for upcoming rival aircraft makers from emerging economies such as China or Brazil that benefit from state support.

© 2011 AFP

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