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The Honolulu Advertiser
Posted on: Wednesday, March 24, 2010

WTO rules EU governments unfairly helped Airbus

By Bradley S. Klapper
Associated Press

GENEVA The World Trade Organization ruled that European governments unfairly financed planemaker Airbus' battle against U.S. rival Boeing, officials said, even as France-based Airbus claimed the decision as a victory.

Three officials with knowledge of the confidential WTO ruling yesterday in the long-running trade dispute said it upheld findings of an interim decision handed down last September that faulted European governments for providing Airbus with subsidies through risk-free loans, research funding and infrastructure support.

Airbus, however, said "70 percent of the U.S. claims were rejected" and the WTO panel dismissed Boeing's claim that its performance suffered as a result of European subsidies. In that case, it would be a victory for Airbus and the European Union ahead of a possible June ruling on alleged U.S. subsidies to The Boeing Co.

While the WTO's report won't halt European subsidies for Airbus, the two disputes could provide tighter guidelines for how far governments can go in supporting companies in a market worth more than $3 trillion over the next two decades.

With emerging powers such as China looking to break the two-company dominance of the airliner industry, clearer rules on public support will become even more important.

The three officials spoke to The Associated Press on condition of anonymity because of the sensitivity of the ruling. One official represented neither party in the dispute.

One official said the WTO panel found that Europe was, in some cases, unfairly subsidizing Airbus through "launch aid" because the planemaker only repays the loans as new planes are sold. For some planes, however, the U.S. failed to demonstrate the subsidies harmed Boeing, a key requirement for proving wrongdoing.

But the three-member panel also found against Airbus' European backers Britain, France, Germany and Spain for providing what was ruled illegal infrastructure support and research and development funding. Officials said the ruling also confirmed examples of Airbus receiving export subsidies, which are completely prohibited in manufacturing under international trade rules.

The Geneva trade body can't force countries or companies to eliminate subsidies, but it can authorize retaliatory sanctions against countries that fail to comply with rulings. It generally takes years to reach that stage, and based on the record slowness of this case, sanctions could be more than a decade away.

The United States brought the dispute to WTO in 2004 after pulling out of a 1992 agreement limiting subsidies in the aviation industry. Brussels responded with its countersuit.

Most analysts predict the WTO will come down on payments by both sides. The balance of the verdicts could determine future negotiations between the U.S. and EU to regulate subsidies in the aviation sector.

Speaking ahead of the ruling, Boeing vice president Ted Austell said the WTO's decision was important for "the hundreds of thousands of U.S. aerospace workers who've had to compete with an illegally subsidized Airbus."