WTO rules some EU Airbus subsidies illegal

30th June 2010, Comments 0 comments

The WTO on Wednesday dealt the European Union a painful blow in a transatlantic trade row over multibillion dollar subsidies for US and European aircraft, ruling some state support for Airbus illegal.

Rival US airplane manufacturer Boeing claimed a "sweeping legal victory" and said it would require Airbus to repay four billion dollars in illegal subsidies, a claim disputed by the European aerospace giant.

Bringing to a head one of the most bitter trade disputes between the two trading powers, the World Trade Organization disputes panel upheld parts of a US complaint in the marathon legal battle.

In a 1,200-page ruling made public for the first time, the global trade referee said EU states should halt some aid for the development and export of Airbus airliners.

It notably accepted three out of seven claims by Washington that key launch aid amounted to export subsidies, which are illegal under WTO rules.

"Taking into account the nature of the prohibited subsidies we have found in this dispute, we recommend that the subsidizing member... withdraw (them) without delay," the ruling said.

"This is a landmark decision and sweeping legal victory over the launch aid subsidies that fueled the rise of Airbus," exulted Boeing chief executive Jim McNerney.

When it first launched the complaint in 2004, the United States charged that the European Union had provided unfair subsidies worth up to 200 billion dollars (139 billion euros) to Airbus.

The European firm retorted on Wednesday that 70 percent of the US claims "were rejected and wild allegations have been proven wrong."

"It is quite disingenuous for Boeing to give such misleading statements," Allan McArtor, Airbus Americas Chairman, told AFP, saying the WTO panel did not require Airbus to repay any amount.

"It's misleading at best, and total fabrication at worst," he said, adding: "It's got more spin on it than a jet engine."

The European aircraft giant suggested it might appeal the decision, saying: "Airbus, the EU and the member states are closely analysing the report in advance of a possible review by the WTO Appellate Body."

McArtor told AFP that there was "sufficient disagreement on several points of the panel's report that would warrant an appeal."

The United States, the chairman said, "got crushed on virtually every one of their primary objectives to cripple Airbus, so they may wish to appeal as well."

The battle between the trading powers at the Geneva-based trade watchdog broke out six years ago after a 1992 'no feud' agreement over the world's two biggest aircraft makers unravelled.

Wednesday's step marks only a first salvo from the WTO.

Its preliminary ruling on the counter claim by Brussels against Washington over allegedly illicit state financing for Boeing is due to be released to both sides on July 16th, trade sources said.

EU Trade Commissioner Karel De Gucht said in a statement that both rulings should be examined together.

"Only then will we have a full and more balanced picture of this dispute. The EU remains committed to a negotiated outcome to the dispute with no pre-conditions on either side."

Analysts anticipate a similar complex and mixed outcome for the European challenges against the impact of US federal and state aid for Boeing, potentially leaving both companies with a big bill once the dust settles after likely appeals.

Wednesday's WTO ruling on Airbus went against German, Spanish and British state finance for the A380 superjumbo airliner only.

However, contested French support for the A380, as well as French and Spanish support for other types of Airbus airliners, were cleared.

The global trade arbitrators also rejected a crucial part of the US case, against launch aid for the future Airbus A350 airliner, which is due to compete head on with the Boeing 787, as well as allegations of an "unwritten" European launch aid programme.

In the complaint Washington filed in May 2005 after talks with Brussels failed to settle the issue, the United States claimed state support in Europe cut prices significantly and harmed US industry.

While the panel agreed that US exports to big emerging markets in Asia and Latin America suffered, it did not agree with Washington's claim of material injury to its civil aircraft industry.

© 2010 AFP

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