WTO To Rule Next Week On Boeing, Airbus Dispute

Plane makers bracing for decision on dispute over plane subsidies, when WTO is expected to confirm findings that European governments unfairly financed Airbus.

GENEVA (AP) -- The Boeing Co. and Airbus are bracing for next week's decision on the first half of their epic dispute over plane subsidies, when the World Trade Organization is expected to confirm findings that European governments unfairly financed Airbus' rise to world No. 1 planemaker.

The verdict is almost a formality, although it will only be delivered confidentially to the parties and then made public sometime in the coming months, but it comes amid trans-Atlantic tension over a disputed U.S. military contract and as European governments finalize funding for Airbus' next big plane.

While the WTO's report won't halt European subsidies for Airbus, it could combine with a coming ruling on U.S. payments to Boeing to provide benchmarks for how far governments can go in supporting companies in a market worth more than $3 trillion over the next two decades.

With emerging powers such as China looking to break the two-company dominance of the airliner industry, clearer rules on public support will become even more important in the future.

Officials say a WTO "interim" decision in September found that Airbus won market share through European government subsidies in the form of risk-free loans, research funding and infrastructure support. WTO panels nearly always maintain their interim findings in so-called "final" rulings, after which the United States and the European Union can lodge appeals.

"This marks a significant step in the U.S. challenge: a final panel decision will establish clear guidelines for European governments and other countries about what type of financing is or isn't appropriate when building airplanes," said Bob Novick, a former U.S. trade official advising Boeing on WTO matters.

"We don't expect the decision will change anything dramatically from the interim ruling," he said.

The ruling could pressure Europe to rethink how it funds a strategic company that employs 52,000 people and provides work for numerous suppliers. It also arguably played a role in the U.S. Air Force's $35 billion contract for refueling tankers, for which Airbus' parent EADS pulled out of the running last week.

EADS had partnered with Northrop Grumman to vie for the 179-tanker order, but their consortium said the terms of the deal appeared designed to eliminate its design in favor of a smaller jet offered by Chicago-based Boeing Co. French President Nicolas Sarkozy is expected to raise concerns that the bidding is anticompetitive when he visits President Barack Obama later this month.

The EU, representing Britain, France, Germany and Spain in the WTO dispute, is also upset that a ruling on alleged U.S. subsidies for Boeing is lagging nearly a year behind the investigation of Airbus' funding. A first decision isn't expected before June on whether Boeing benefited from billions of dollars in backdoor funding from NASA and the U.S. Defense Department.

"This is a never ending story. With appeals coming and going we are years away from final rulings, while we all know that in the end we'll have to sit down and negotiate," said Airbus spokeswoman Maggie Bergsma. "Lets see if Boeing's supporters are still as enthusiastic about WTO compliance when their subsidy report will come out in summer."

Airbus beat rival Boeing in aircraft production in 2009, delivering a record 498 aircraft and maintaining its place as the world's largest planemaker, compared with Boeing's 481. It also posted 271 orders, beating Boeing's 142.

The No. 2 position has rankled Boeing, which saw its Toulouse, France-based competitor use hundreds of millions of euros in low-interest government loans to develop the A380 superjumbo. Now, it wants the WTO ruling to stop European governments from using the same strategy to fund its midsize, long-haul A350 XWB that aims to compete with Boeing's 787 Dreamliner.

Brussels says these loans known as "launch aid" are legal because Airbus repays them as new planes are sold. Washington argues these are subsidies because they allow Airbus to write off production setbacks and losses if sales don't meet forecasts.

"It would be troubling if the European governments were to go ahead and provide launch aid for the A350 if launch aid was just ruled illegal for another plane's development," Novick said.

The United States originally brought the dispute to WTO in 2004 after pulling out of a 1992 agreement limiting subsidies in the aviation industry. Brussels responded with its countersuit.

The Geneva trade body can't force countries or companies to eliminate subsidies, but it can authorize retaliatory sanctions against countries that fail to comply with rulings. It generally takes years to reach that stage, and based on the record slowness of this case, sanctions could be more than a decade away.

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