- The Washington Times - Friday, July 27, 2007

GENEVA (AP) — The European Union made its final defense yesterday of government loans used to help Airbus develop new planes before the World Trade Organization rules on whether they are legal.

The WTO decision could have far-reaching ramifications for the plane maker, which still must decide how it will fund its midsize, long-range A350 XWB.

According to a transcript, the European Union rejected U.S. accusations that development aid granted to Airbus over the past four decades amounts to government subsidies that unfairly capture customers from rival Boeing Co. A closed-circuit broadcast of the two-day hearing will be aired today at the WTO.

The trans-Atlantic dispute, expected to be the most complicated and costly in the WTO’s 12-year-history, depends on the ability of Washington and the 27-nation European Union to show that the purported subsidies have caused their industries harm. Both have presented evidence of lost plane sales or lowered prices to back up their claims. The WTO could award billions of dollars in retaliatory sanctions.

“The United States is attacking subsidies that it claims were granted as long ago as 1995 — to companies that no longer exist,” Europe told the three-member WTO panel investigating U.S. accusations.

The European Union, meanwhile, says the United States and certain American states have broken trade rules by giving Boeing tax breaks and grants. It also accuses Washington of providing vast amounts of hidden support to the Chicago company through military contracts, citing a total subsidy figure from tax breaks, grants and military contracts of $23.7 billion.

The United States, which declined to comment, has said Airbus received $15 billion in development aid from the 27-nation European Union and its member states, which would have amounted to costs as high as $205 billion if the loans were issued at commercial rates.

“There is not really a dispute that launch aid is a subsidy. If a plane fails, the launch aid is not repaid; it is just written off,” said Bob Novick, a former U.S. trade official who advises Boeing on WTO matters. “This shifts the risk from Airbus to the governments. The commercial market would not provide financing with such terms.”

Brussels said Airbus has received loans from different countries under different terms, but always in compliance with U.S.-EU agreements.

“The U.S. would like the WTO to condemn fully transparent commercial-term loans while seeking WTO approval for the billions Boeing has received in gifts and grants hidden from public view in military contracts,” said Geoffrey Shuman, Airbus’ head of European affairs.

An interim ruling in the U.S. case against Europe could be issued as early as October. A decision on the EU complaint is not expected until next year. Both would be subject to appeals.

Many people close to the dispute say the WTO panels probably will cite wrongdoing by both sides, possibly resulting in a legal stalemate.

U.S. criticism of EU development aid is “like the pot calling the kettle black,” said Sandy Morris, analyst at ABN Amro in London.

“At least we understand the much-criticized government-refundable launch aid. We can see it” on EADS’ books, he said. “When you get to Boeing you can’t see anything. But do we believe that they also benefit? Of course we do. EADS looks very transparent in contrast.”



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