Thursday, July 1, 2010
GENEVA (AFP) - – The WTO on Wednesday dealt the European Union a painful blow in a transatlantic trade dispute 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. Key elements of US trade dispute with EU over Airbus
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 complex ruling said.
"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.
The European firm 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,
Suggesting it might appeal the decision, it said: "Airbus, the EU and the member states are closely analysing the report in advance of a possible review by the WTO Appellate Body."
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.
The arbitrators noted that Boeing's performance had in fact improved after 2004.
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.
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