Titanic Airbus-Boeing trade war takes new turn

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France said Wednesday the World Trade Organization had ruled US subsidies paid to aerospace giant Boeing illegal in an interim finding on a multi-billion dollar dispute brought by the European Union.

The EU said that only negotiations at the highest political levels could lead to a solution to the acrimonious spat over US and EU state support, which has dogged the two biggest players in the aerospace industry, Boeing and Airbus since 2004.

The much-awaited ruling, effectively the second part of a tit-for-tat dispute, comes a year after the WTO rapped Brussels for illegally providing subsidies to Airbus, the maker of the A380 superjumbo.

The WTO said that the confidential report by its disputes settlement panel has been handed to the parties. The EU confirmed reception although it would not disclose the 750 page report's findings.

Under WTO rules, the interim ruling is meant to be held confidential until the global trade body publishes the full report by its panel of dispute settlement arbitrators.

The French transport ministry, however, claimed victory.

"Without going into the details, the summary of the panel's conclusions criticises the massive subsidies received by Boeing which violate WTO rules and finds in favour of the essence of the European Union's complaint," the transport ministry said.

European Union trade spokesman John Clancy referred to earlier findings on the parallel case against Airbus and said: "Today's ruling provides us with the second half of the story.

"The EU appealed to those findings (and) while litigation continues in both cases, we today have a clearer picture of where the two parties stand," he added.

Clancy reiterated the EU's position that "only negotiations at the highest political level can lead to a real solution" and expressed the hope in Brussels that the new report "provides momentum in that direction."

Brussels brought its case to the WTO on October 6, 2004 -- the very same day that Washington complained against EU subsidies to Airbus. It had therefore been frustrated by the time lag between the rulings on the two cases.

An Airbus spokeswoman said ahead of Wednesday's ruling that it could herald a negotiated settlement to the long-running dispute between the two rivals, which are at each other's heels for every commercial airliner order.

"Airbus is looking forward to see the European Union case finally moving forward," said Airbus spokeswoman Maggie Bergsma ahead of the ruling.

"We expect the WTO to confirm that Boeing received billions of illegal subsidies."

According to an aviation analyst who declined to be named, if the WTO were to find against Boeing in the dispute, "it would be the most direct route towards a negotiation to end this affair."

"I think it would head towards that," he said.

"It is in their interest to end this war and to concentrate instead on the development of their aircraft because competitors are closing in on mid-sized carriers," he added.

The EU complaint accuses Washington of violating international trade rules by funnelling subsidies to civil aviation through military research funds.

About 23 billion dollars of subsidies for Boeing were masked as defence research, Brussels claimed.

But Boeing, the maker of the new 787 Dreamliner, has insisted that the US support is above board.

"We look forward to learning how the WTO has ruled in today's preliminary decision on US practices, none of which have the market-distorting impact of launch aid nor even approach the sheer scale of European subsidy practices," the US giant said.

It also accused the Airbus of not abandoning controversial "launch aid," some of which was found illegal by the WTO in its earlier ruling in the case.

"To date, Airbus and its government sponsors have defiantly resisted abandoning launch aid," Boeing said, adding that it expected Airbus to "make good on their end of the WTO bargain."

The EU has appealed against the WTO's earlier ruling against aid for Airbus.

© 2010 AFP

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