Aid to Airbus for A380 was illegal: WTO

Aid to Airbus for A380 was illegal: WTO

Aid to Airbus for A380 was illegal: WTO

But the European Union was not determined to have systematically abused global trade rules, several people with knowledge of the report said. Both American and European Union officials declared victory after the 1,000-page confidential finding was given to trade agencies.

Representative Norman Dicks, Democrat from Washington said that the WTO found that a substantial amount of the low-cost loan money that European governments provided to develop the A380 jet was illegal and should be repaid by Airbus.

Dicks said a panel of experts from the trade organisation found that other series of Airbus planes — the A300, A310, A320, A330 and A340 — also benefited from similar improper subsidies. The report is a response to a complaint filed by the United States on behalf of Boeing, which argues that the European Union and its governments funnelled billions of dollars in illegal subsidies to Airbus from 1970 to 2004.

The Europeans stressed, however, that the WTO had rejected many of the specific arguments that were in the complaint. The panel’s findings could have a substantial impact on the competition between Boeing and Airbus for a $35 billion contract to build new aerial refuelling tankers for the Air Force. Airbus won the contract last year but it was overturned by government auditors, and the Pentagon is expected to start a new bidding process soon.

Dicks argued that it would be “inconceivable” for the Air Force to reopen the bidding without considering the WTO panel’s findings. “The US government cannot reward illegal market actions that have harmed US manufacturers and stolen US aerospace jobs,” he said in a statement.

The United States had also claimed that the Airbus received about $8 billion in research and development and facilities financing. Both Airbus and Boeing have about six weeks to review the finding and comment on it. The trade body is expected to issue a formal ruling by the end of the year. Both sides can appeal that ruling, but WTO rules limit the process to 90 days, making a final outcome likely in the spring.

European officials who had been briefed on the report said that the WTO. panel had rejected 70 per cent of the claims in the American complaint.
“Reimbursable investment loans for the A380 were not judged to be prohibited in their totality,” said one person with knowledge of the report.

American officials who had been briefed on the ruling disputed that the United States had lost on that many points. In some cases, they said, only one of the various arguments needed to be accepted for the panel to find that some subsidies were unfair. Representatives for the European trade commission, the United States trade representative, Boeing and Airbus all said that they were studying the report, and declined to comment.

The most critical charge, experts said, involved about $15 billion in low-cost government loans to develop Airbus planes. Roughly $4 billion of the loans in question went to the twin-deck A380 jet, which entered service in 2007. Boeing lawyers had said that a ruling against Airbus could mean that it will be required to either refinance those loans on commercial terms or otherwise restructure them.

 Under the current terms of the loans, Airbus makes its repayments as its planes are delivered to customers. Airbus has delivered 18 of 200 orders for the A380. The panel’s findings do not apply to European pledges of loans to help Airbus develop the A350 widebody jet. France, Germany and Britain have pledged a combined 2.9 billion euros ($4.1 billion) to finance the A350, which is still in the early design phase and is not expected to be delivered until 2013.

A counterclaim by the European Union, meanwhile, is being reviewed by a separate WTO panel.

That suit contends that Boeing has received at least $24 billion in backdoor subsidies through generous contracts with the United States military and space programmes, as well as significant tax breaks from Washington State. An interim report on the Boeing case is expected in six to nine 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 US over aid to Boeing,” said Lutz Güllner, a spokesman for the European trade commissioner, Catherine Ashton.

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