- The Washington Times - Thursday, September 27, 2007

GENEVA (AP) — The United States payment of what the European Union has called illegal subsidies to Boeing Co. has cost rival plane maker Airbus $27 billion in lost revenues over the past three years, the European Union said yesterday as WTO hearings over the trans-Atlantic dispute began.

Brussels added that Washington will have only itself to blame if the World Trade Organization rules next year that the U.S. has broken commerce rules in its financing of Boeing, which is embroiled in a bitter legal dispute with Airbus.

The U.S. said government contracts do not give the Chicago company an unfair advantage and noted that Airbus has actually gained 20 percentage points of market share at Boeing’s expense since 2000.

Globally, the market for planes is worth an estimated $3 trillion over the next two decades.

“The lavish subsidies … allowed Boeing to engage in aggressive pricing of its aircraft, which has caused lost sales, lost market share and price suppression to Airbus on a number of select markets,” the European Union said as the hearings started. “The support clearly aims at weakening Airbus’ position and competitiveness.”

The trans-Atlantic clash, expected to be the most complicated and costly in the WTO’s 12-year-history, rests on the ability of the U.S. and the European Union to show that the reputed subsidies have caused their industries harm. Both have presented evidence of lost plane sales or lowered prices to back up their claims.

An interim ruling in the U.S. case against Brussels was scheduled for October but has been delayed because of the complexity of the dispute. A decision on the European Union’s complaint is not expected until next year. Both would be subject to appeals.

The U.S. accuses Airbus of taking advantage of decades of European subsidies worth the equivalent of up to $205 billion to capture long-standing Boeing customers and become the world’s largest seller of planes.

The European Union, meanwhile, refers to tax breaks, development funding and outright grants to Boeing as examples of wrongdoing by the U.S. government and the states of Kansas, Illinois and Washington. It also accuses the U.S. of providing vast amounts of hidden support to Boeing through military contracts, citing a total subsidy figure through 2024 of $23.6 billion.

Brussels said $5 billion in illegal U.S. subsidies to Boeing from 2004 to 2006 had a more than fivefold negative effect on Airbus revenues in that period.

“The EU’s claims are to distract attention from its own massive subsidies,” said Gretchen Hamel, a spokeswoman for the U.S. trade representative in Washington.

She said the European Union had vastly inflated the value of NASA and other government programs involving Boeing, and cannot prove that they have harmed Airbus’ development of planes or sales.

Bob Novick, a former U.S. trade lawyer representing Boeing on WTO matters, said any problems Airbus has experienced were the result of its failure to recognize early enough the importance airlines were putting on fuel efficiency, and the company’s choice at the beginning of the decade to invest in the A380 superjumbo instead of a smaller, more efficient plane.

“When Airbus rushed out a proposed A350 model to compete with the 787, it was rejected by the market. A second proposal was also rejected,” Mr. Novick said.

“The EU cannot blame that on contrived subsidies to Boeing.”

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