EU Says Complies With WTO Ruling On Airbus

December 1, 2011

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The European Union said it had met a deadline for complying with a WTO ruling against billions of euros of illegal subsidies for aircraft maker Airbus and outlined its actions in a letter to the United States and the WTO.

Neither side involved in the world's largest trade dispute disclosed what steps the European Union had taken, but some trade experts doubted it would succeed in putting an end to the long-running spat between Airbus and its US rival Boeing.

"Through this package we address all categories of subsidies, all forms of adverse effects, and all models of Airbus aircraft covered by the WTO rulings," EU trade spokesman John Clancy said in a statement on Thursday.

The reference to "all models covered by the rulings" is crucial because Boeing is adamant that the EU must not just undo old subsidies, but also promise not to give Airbus any more in future. But the two sides may differ about whether the WTO ruling covers future as well as past payments.

Clancy said the EU expected an "equally solid set of compliance actions" from the United States after the WTO issues its final ruling on subsidies to Boeing early next year.

Airbus said in a statement that only minor changes to European policies were needed to achieve compliance with the ruling by a WTO appeals panel, which ordered the EU to comply by December 1 in a ruling handed down six months ago.

US Trade Representative Ron Kirk said he needed time to verify that the EU had really scrapped its subsidies.

"We will base our next steps on a careful evaluation of that announcement, and whether it demonstrates that the EU has in fact taken the steps necessary to bring itself into full compliance with the WTO decision," he said in a statement.

"The continued success of the American aerospace industry, and the jobs of hundreds of thousands of Americans who work in this highly competitive sector depend on the ability to compete on a level playing field -- the level playing field assured to them by our WTO agreements."

Boeing said Airbus had been receiving "launch aid and other forms of illegal government subsidies" for more than 40 years and said it would work with Kirk in the days ahead to ensure compliance had been achieved.

"We expect Airbus and its government sponsors to demonstrate that the practice of market-distorting launch aid -- the most pernicious form of subsidy Airbus was found to have received -- has ended," Boeing said.

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While the United States has attacked the EU's launch aid, the EU has complained to the WTO about some US government programmes to help Boeing, but that case is still in the appeals stage, with a decision expected around March or April 2012.

US officials contend the two cases show European governments have provided more assistance to Airbus than the United States has to Boeing over the years.

If Washington is not satisfied, it could begin proceedings at the WTO to impose trade retaliation, known in trade jargon as "suspending concessions."

Kirk said on Thursday the United States was open to a negotiated settlement that addresses "WTO-inconsistent" subsidies on both sides of the Atlantic.

But "this is a case that affects hundreds of thousands of jobs and we're determined to ensure this victory is not a paper victory," Kirk said.

Boeing officials, speaking before the EU sent its compliance document on Thursday, said the EU was obligated to show it has already taken steps to comply with the WTO ruling.

"If the Europeans have not done anything to comply, other than to say what they plan to do, that is noncompliance," said Boeing lawyer Robert Novick, a partner at the law firm WilmerHale. "The US could under WTO rules immediately seek authorisation to suspend concessions."

Boeing believes the United States should vigorously enforce its rights if Airbus has done nothing to repay past European government subsidies for its A380 aircraft and is receiving new subsidies for other planes such as the A350.

"This provision of launch aid for plane after plane after plane with no indication of calibration on that is unsustainable. It's what the case was about. Enforcing this decision in a meaningful way is important to address that market-distorting behaviour," Novick said.

(Reuters)