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WTO Issues Confidential Ruling on Airbus Subsidies

Reuters Created: September 4, 2009 Last Updated: September 4, 2009
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Officials arrive at World Trade Organization (WTO) headquarters in Geneva. (Fabrice Coffrini/AFP/Getty Images)

Officials arrive at World Trade Organization (WTO) headquarters in Geneva. (Fabrice Coffrini/AFP/Getty Images)

GENEVA—The World Trade Organisation on Friday issued a 1,000-plus page ruling on whether subsidies the EU gave to Airbus were illegal, although the findings will not officially be made public for months.

"It's gone," WTO spokesman Keith Rockwell said after hard copies of the confidential report were distributed to U.S. and European diplomats in Geneva. "We have it now. We are looking into it," one Geneva-based EU official said.

The three-member WTO panel was widely expected to agree with complainant Washington that billions of euros of "launch aid" loans Airbus received to build the A380 and other top-selling planes was anti-competitive and broke trade laws.

The Airbus case, and the European Union counter-claim about U.S. support to Boeing, the United States' biggest single exporter, represent the most complex and commercially significant dispute in WTO history.

Washington says Airbus received a $205 billion boost from advantageous loans and other perks from France, Germany, Spain and Britain over two decades, giving it an unfair edge.

Brussels, in turn, argues the Airbus loans were fair and claims that Boeing got big illegal subsidies from U.S. agencies including NASA plus state tax breaks worth some $24 billion.

'Half the Story'

While not commenting on Friday's findings, Brussels stressed a full picture of the aircraft subsidy dispute would only become clear after the initial ruling is released from the case against Boeing, expected in six months.

"It is important to recall that this report is only half the story and must be read together with an interim report on the EU case against the U.S. over aid to Boeing," said Luiz Guellner, spokesman for EU Trade Commissioner Catherine Ashton.

The Office of the U.S. Trade Representative also declined to comment on the specifics of the ruling, while repeating its view that "the European governments have provided unfair subsidies to Airbus that harm U.S. interests."

Boeing, which has said it hopes the WTO decision would halt some $4 billion in EU assistance for Airbus' latest project, the A350 wide-body jet, declined to comment on the WTO report and Airbus also had no immediate statement.

Shares in both companies traded higher after the report was released. Boeing was up 0.4 percent, erasing earlier losses, and Airbus parent EADS, whose shares had risen 1.9 percent earlier on hopes of an aerospace recovery, was up 2.7 percent.

It could take years for the WTO aircraft litigation to run its course, and for definitive rulings to be issued on the kinds of government financing that are acceptable in the sector.

Most industry analysts expect Boeing and Airbus to negotiate a settlement in their long-running dispute before it reaches the WTO's top court.

The extent to which Airbus or Boeing comes out cleaner than the other in the twin preliminary rulings will affect the dynamics of those talks, which both sides have said they eventually want to hold.

Before the WTO ruling was circulated on Friday, Airbus spokeswoman Maggie Bergsma said "the window is closed" for such talks until the trade arbiter reaches an initial verdict in the Boeing case, which Washington is expected to lose.

"We look forward to a negotiated settlement in which both sides recognise the way this industry works," she said.

If the panel strikes down launch aid, Airbus may have fewer options to finance new airliners like the wide-body A350 due in the next decade. Such a decision would also affect how rivals in Brazil, Canada, China, Russia and Japan fuel their expansion.

"Of course we will be very interested because it may affect the way others operate," Brazilian Foreign Minister Celso Amorim said before the ruling was issued. Brazil's Embraer and Canada's rival Bombardier spent years embroiled in years of WTO that eventually left neither better off.




   

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