Boeing, U.S. Seen Winning WTO Case on European Aid to Airbus
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Sept. 3 (Bloomberg) -- Boeing Co. and the U.S. are set to win a case at the World Trade Organization over $15 billion in European government loans to Airbus SAS, the world's largest aircraft maker, U.S. trade lawyers and former officials said. A panel of WTO judges is scheduled to rule tomorrow on a U.S. complaint over loans that the U.K., Spain, Germany and France provided Airbus over four decades. It will be a preliminary ruling in a five-year dispute over aid between Toulouse, France-based Airbus and Chicago-based Boeing. "If it's a straightforward reading of the rules, the panel should find against Airbus," former U.S. Trade Representative Susan Schwab said in an interview. The case is the biggest in the 14-year history of the WTO, and could cast a cloud over the commercial relationship between the U.S. and Europe, the world's largest. It may also reshape funding for the two largest plane makers. WTO judges are scheduled to rule within six months on a European Union counter-claim against U.S. assistance that helped Boeing develop the new 787 Dreamliner and other aircraft. The EU cited military contracts, NASA research grants and state tax breaks. Claude Barfield, a resident scholar at the American Enterprise Institute, a public-policy research group in Washington, said he expects the WTO eventually to rule against both Boeing and Airbus. That means at some point both governments will need to sit down and craft an agreement on what aid is permissible, Barfield said. 'Most Subsidized Aircraft' "It's easy to speculate about the outcomes of a match when not even the first half is over," said Maggie Bergsma, a spokeswoman for Airbus, in an e-mailed statement. "The 787 remains the most subsidized aircraft in the history of aviation." The immediate impact of the preliminary ruling depends on terms of the decision, which may be hundreds of pages long, and on how each government reacts. The judges' findings can be appealed, a process that in some WTO cases has taken years. The WTO judges may also say whether aid provided since the case was filed in 2004 is covered by the ruling. Airbus has received commitments from European governments for $4.2 billion in loans to help it produce its new A350 aircraft, scheduled to enter service in 2013. While that plane wasn't part of the case before the WTO, the U.S. argued to the international trade arbiter that a ruling against previous disbursements would prohibit all such "launch aid." Aid to A350 The current case should have no effect on aid to the A350, Lutz Guellner, a spokesman for the European Commission, the 27- nation EU's executive arm in Brussels, said Aug. 28. The U.S. also argued that EU loans were used to boost exports of Airbus jets, making them "prohibited subsidies" in the legal terminology of the WTO. "The key factor is whether so-called launch aid is found to be prohibited or not," John Magnus, a lawyer at Miller & Chevalier in Washington and an expert on WTO subsidies disputes, said in an interview. "If so, it will very quickly become very ugly for the European side." Magnus said he expects the WTO to find against the EU in some fashion. Labeling the aid a prohibited subsidy would force bigger changes by the EU in order to comply, he said. The WTO can't force a country to change its policies. Instead, after appeals are exhausted, it can authorize retaliation against products from countries found in violation. The effect of a ruling against Airbus "depends on what the U.S. politicians want to do with it," Richard Aboulafia, an analyst at the Fairfax, Virginia-based Teal Group, which publishes research on aerospace and defense companies, said in an interview. Tanker Contract Airbus is a unit of European Aeronautic, Defence & Space Co., which is bidding in the U.S. with Northrop Grumman Corp. for a $35 billion Pentagon project to build refueling tankers. Its top rival for the contract is Boeing. "Boeing's political supporters could be able to use a WTO victory as an effective weapon to stop any decision to give Northrop/EADS a tanker contract," Aboulafia said. Both the EU and U.S. would need to make an effort to comply with the WTO's decisions on aircraft aid, according to William Reinsch, president of the National Foreign Trade Council, a Washington-based organization that represents the largest U.S. exporters, including Boeing. Otherwise the countries risk undercutting their ability to get future trade decisions upheld against countries such as China or India, he said. "This is going to cause them, no doubt, some political complication," said Reinsch, a former Commerce Department trade official. 'But if they flout the rules, it would compromise the institution." To contact the reporter on this story: Mark Drajem in Washington at mdrajem@bloomberg.net ----------------- Everyone remembers that the former secretary of state Wynne announced Boeing did not win the KC-45A contract. The communities and the tax payers were relying on a big major company like the Boeing Company. The KC 767/777 tankers would made Amerian jobs more than nine thousands jobs and global partners and suppliers would actively work and expend the financial support around the world. Well, as soon as a big contract canceled for the Boeing Company, The Boeing had to let go (lay off) more than 10,000 people for Boeing Employees. Now the ripple action increased for the recession became the worst economic crisis and for the global economic crises got into worse. The financial institutions and the world banks are not in function which would make sense unfair EU subsidies would be part of this problem, who knows that started since 37 years ago and crashed...- global crisis...: Loan Free, forgiving loan, and etc. The Marshall Plan of 1947 caused lending practices at the bank to be altered, as many European countries received aid that competed directly with World Bank loans. The Marshall Plan (from its enactment, officially the European Recovery Program, ERP) was the primary plan of the United States for rebuilding and creating a stronger foundation for the countries of Western Europe, and repelling communism after World War II. WTO document shows that the Large civil aircraft industry is dominated by Airbus and Boeing. Airbus's world market share has increased steadily since the early 1970s; it currently exceeds 50% of all new orders (Eurostat, 2006c), Manufacture of Aerospace equipment in the European Union). The United States hopes the trade body will condemn the European Union, representing Britain, France, Germany and Spain, for providing what it calls illegal subsidies that give Airbus, based in Toulouse, France, an advantage in a market worth US$3 trillion over the next two decades. In September 2009, the New York Times reported that the World Trade Organization would likely rule against Airbus on most, but not all, of Boeing's complaints; the practial effect of this ruling would likely be blunted by the large number of international partners engaged by both plane makers. For example, 35% of the Boeing 787 is manufactured in Japan. Thus, some experts are advocating a negotiated settlement. Tensions increased by the support for the Airbus A380 have erupted into a potential trade war due to the launch of the Airbus A350. The A350 competes with Boeing's most successful project in recent years, the 787 Dreamliner. The WTO has 153 members, representing more than 95% of total world trade and 30 observers, most seeking membership. The WTO's headquarters is at the Centre William Rappard, Geneva, Switzerland.
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