WTO set to release landmark ruling on Airbus loans

30th June 2010, Comments 0 comments

The WTO will reveal on Wednesday its ruling on a US complaint against multibillion dollar subsidies to European aircraft giant Airbus, which is expected to back part of Washington's case.

The World Trade Organization said in a statement that the report by its disputes settlement panel on the case, which has been kept confidential for three months, "is due to be circulated today, Wednesday 30 June, at approximately 4.30 pm (1430 GMT)."

In the complaint first lodged 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, helping the European maker to seize more than half of the market for civil airlines.

A source in Brussels close to the dispute said the report by the WTO panel rules that the mechanism of repayable state loans, crucial to the development of Airbus airliners, is legal and compatible with its rules.

However, it finds that the low level of interest rates at which the EU has offered such funding under a more than two decade old mechanism were illicitly below market rates.

Overall, the source described the complex ruling as a mixed outcome for authorities on both sides of the Atlantic.

Both sides have had the landmark 1,000 page ruling in their hands since March, but it has been kept confidential for three months under WTO rules.

The United States and the EU launched complaints on subsidies against each other six years ago at the WTO after a 1992 'no feud' agreement over the world's two biggest aircraft makers unravelled.

The rivalry emerged with Airbus's growth after it was set up as a joint venture in 1970 by aircraft makers in Europe with strong government funding.

By the 1990s it was challenging Boeing's dominance, growing to number one in the market for airliners about a decade later.

Wednesday's step marks only the first salvo in the bruising multibillion dollar subsidy battle between the aerospace giants.

The WTO's 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.

In each case, Brussels and Washington would have 60 days to lodge appeals against the WTO rulings from the moment they become public.

A mixed judgment on launch aid would come as a relief for Airbus, since it may not call into question the principle of support for its future A350 airliner and allow adjustments to stay in line with world trade rules.

In March, the European aircraft maker said after a first reading of the WTO ruling that 70 percent of the US claims had been rejected. It claimed that possible future funding would not be affected "in any way".

Airbus nonetheless said it was studying findings that past loans "contain a certain element of subsidy."

Boeing had hailed the WTO panel's findings as a "powerful, landmark judgment and good news for aerospace workers across America who for decades have had to compete against a heavily subsidized Airbus."

The United States argued that European state aid had helped Airbus leap from a 37 percent market share in 2001 to 57 percent in 2006.

Analysts believe that the litigation between the US and EU over Airbus and Boeing is likely to carry on for years, due to the likelihood of complex, mixed outcomes for both the US and European complaints, the hugely competitive environment and the avenues for appeal at the trade watchdog.

© 2010 AFP

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