Tuesday, March 23, 2010

WTO likely to rap Airbus aid but row to drag on

Defense News: GENEVA, March 23 (Reuters) - The World Trade Organisation is expected to confirm criticism of European aid for Airbus (EAD.PA) when it issues a final subsidy ruling on Tuesday, but this won't spell an end to the record transatlantic trade dispute.

Subsidy rules lie at the heart of the battle for dominance of the market for civilian aircraft which aerospace firms estimate will be worth $3 trillion over the next 20 years.

The United States argues that Airbus got a total of $205 billion in unfairly priced loans and other benefits from France, Germany, Spain and Britain over two decades -- making the case by far the biggest international trade dispute.

Even if the ruling condemns support by European governments for Airbus, the European Union will argue that a full picture will emerge only when the WTO rules on a countersuit brought by Brussels.

Final resolution of the two cases -- which may yet involve a negotiated settlement -- will define the rules of the civil aviation market, where Airbus and Boeing have together nearly $1 trillion of aircraft on their order books, for years to come.

A confidential interim ruling in September found European government payments to Airbus were "actionable" and backed some U.S. claims that they fell into the more severe category of illegal export aid, sources familiar with the findings said.

But trade judges were said to have rejected the idea that the findings would apply to future programmes, meaning trade tensions with Boeing (BA.N) could continue over the funding for Europe's next generation of airliner, the Airbus A350.

Barring a major upset, Tuesday's final ruling is expected to endorse the earlier report which triggered trade rhetoric on both sides of the Atlantic, trade diplomats said.

Boeing and Airbus clashed before the final report had even been published, saying it was likely to justify their claims.

Boeing seized on a German promise to provide similar funding for the A350 to the disputed system of government loans which triggered the original U.S. complaint to the Geneva-based WTO.


The move "flies in the face of both the expected WTO decision and the rules-based global trading system we've all endorsed", said Boeing's top legal executive Ted Austell.

Airbus spokeswoman Maggie Bergsma said the ruling would be "significantly disappointing for Boeing and largely different to what they are predicting".

The WTO panel's ruling, although final, is confidential to the parties in the case. Publication of the 1,000-page document must await translation and could take until the end of April or longer.

U.S. and European officials gave their interpretations of the report before publication, with Washington saying it would prove that Airbus had harmed U.S. workers and Europeans stressing it was only one part of a long process. In theory a WTO ruling could require the EU to desist from further aid within weeks. In practice both sides are certain to appeal both cases, stringing litigation out for months or years. (Reporting by Jonathan Lynn and Tim Hepher; editing by David Stamp)

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