Feb 29, 2012 03:40 PM IST | Source: Reuters

WTO epic grinds on with Boeing subsidy appeal

AIRBUS-BOEING-TRADE:WTO epic grinds on with Boeing subsidy appeal

By Tim Hepher

PARIS (Reuters) - Airbus and Boeing Co were urged on Wednesday to negotiate an end to the world's largest trade dispute as the World Trade Organization (WTO) prepared to issue its latest findings in a long-running subsidy row.

The Geneva-based trade watchdog was due later on Wednesday to deliver its verdict on an appeal by the United States against a WTO ruling that Boeing benefited from at least $5.3 billion in subsidies from U.S. authorities.

The ruling last March came months after a separate panel of WTO experts found that Airbus drew on billions of dollars of subsidies through subsidized loans by European governments.

Both sides have claimed victory every step of the way in the epic contest between dominant planemakers which has dragged on for over seven years, consuming thousands of pages of reports and costing an estimated $100 million or more in legal bills.

"The only way this can be resolved is a permanent agreement between all the parties concerned and there is no sign of this happening yet," said UK-based aerospace and defence consultant Howard Wheeldon.

"There is no alternative to an agreement between the governments and the two warring parties," Wheeldon added.

Sources familiar with the matter said last week the WTO would issue its confidential appeal findings to the two parties, the United States and the European Union, at 1100 GMT on Wednesday.

The report is not expected to be made public for several weeks but extracts of such findings tend to leak out beforehand.

The United States says the WTO has already put its finger on $18 billion in illegal subsidies paid to Airbus in the earlier case and wants to start the clock ticking on annual sanctions of between $7 billion and $10 billion without being distracted by the new appeal.

The European Union wants to narrow a nine-month gap between the two cases and open the door to negotiations, but only if the U.S. drops a condition that Airbus should axe subsidies first.

While disputing the $18 billion figure, it says it has complied with the earlier ruling, but Washington denies this.

The two sides continued to spar on the eve of the ruling.

"We Europeans have had a clear position since 2003: talks anytime, anywhere, about anything without preconditions," said Airbus spokeswoman Maggie Bergsma.

At Boeing, spokesman Charlie Miller said: "It is not a question of negotiation, it is a question of compliance."


Most trade analysts say the twin cases are likely to drag on for years before sanctions actually take effect, or the two sides try to negotiate a deal to avert an all-out trade war. Financial analysts have mostly grown weary of the row but unions on both sides of the Atlantic have raised the potential impact on jobs.

Star exhibit in Wednesday's case is Boeing's 787 Dreamliner, the world's first mostly plastic-composite passenger plane.

Airbus argues Boeing got a jump-start on composite design by taking part in government research and found out how to build the revolutionary 787 earlier than it could have done alone.

It also says the 787's aerodynamic design owes a debt to arms projects like the F-22 combat jet and that doing jobs for NASA taught Boeing how to cut noise and maintenance costs.

Europeans say the lift from R&D projects translated into savings that allowed Boeing to slash prices across its products, painting vivid details of a price war between 2004 and 2006.

Boeing in turn argues it was its decision to broaden its supply chain to global industry that brought it access to more technology and that the results of government-funded research merely went into the pool of publicly available science.

It says the 787 was deliberately designed as "ITAR-free -- meaning it is not subject to U.S. restrictions on export of sensitive technology -- so it could not have benefited from the list of U.S.-funded military airplane projects cited by the EU.

Boeing admits dropping prices in 2005 and 2006 but says it was forced to do so to respond to aggressive pricing from Airbus, which it blames in turn on unfair European subsidies.

In Wednesday's appeal verdict, the United States will hope to eliminate a finding that NASA paid $2.6 billion in illegal aid, while the EU hopes to strengthen a finding that Boeing got $476 million of aid from Kansas without directly harming Airbus.

The Kansas payments have come under the spotlight after Boeing decided last month to shut down a Wichita plant employing 2,160 workers, sparking protests from local politicians.

(Editing by David Holmes)

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