WTO rules out some EU state aid for Airbus

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

In a 1,200 page ruling made public for the first time, the WTO disputes panel upheld parts of a US complaint, recommending the removal of some state aid by the European Union for the development and export of Airbus airliners.

It notably accepted three out of seven claims by Washington that key launch aid for the 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 complex ruling said.

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.

"This is a landmark decision and sweeping legal victory over the launch aid subsidies that fueled the rise of Airbus," said 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.

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

"Neither jobs nor any profits were lost as a result of reimbursable loans to Airbus," the European aircraft giant said in a statement.

The WTO ruling went against German, Spanish and British state finance for the A380 superjumbo airliner.

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 alleged launch aid package 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.

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

The World Trade Organisation'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.

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

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

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

Both sides have had Wednesday's landmark ruling in their hands since March, but it has been kept confidential for three months under WTO rules.

© 2010 AFP

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