(Reuters) - Plane maker Boeing (BA.N) received unfair subsidies from the U.S. government, a World Trade Organization report said on Monday, according to Boeing's European rival Airbus (EAD.PA).

The two companies disagreed over the extent of the subsidies outlined in the report, which was delivered to the U.S. government and the EU Commission but not released publicly.

Airbus said the report showed Boeing had received at least $5 billion in illegal subsidies and was only able to launch its 787 Dreamliner with such support. Boeing denied the assertions.

The United States and European Union, both trading superpowers, have been fighting cases against each other in the WTO for more than six years over each other's subsidies for large passenger aircraft.

Boeing's stock, a Dow component, showed little reaction to the WTO report. Shares were up just 8 cents at $69.31.

"I don't think there's clarity as to what this really means. It seems to be a lot of noise," said Alex Hamilton, managing director of EarlyBirdCapital, a boutique investment bank.

Monday's report by WTO experts marked the latest stage in the dispute as Airbus and Boeing battle for the $1.7 trillion market.

The report is still confidential, but even Boeing acknowledges that the WTO has backed some of the EU claims. However, the two sides disagreed strongly over the amount of condemned Boeing subsidies and how they compared with those given to Airbus.

The findings came as a U.S. Air Force decision was expected within weeks on whether to award Boeing or Airbus parent EADS a contract worth $25 billion to $50 billion for refuelling tankers. But EarlyBird's Hamilton said the WTO report was likely to have little impact on the U.S. government decision.

Both plane makers have supporters in the U.S. Congress, as Boeing would build and finish the tanker in Washington state and Kansas while Airbus would assemble it in Alabama.

Senator Richard Shelby of Alabama said that the WTO report "unquestionably states that Boeing received significant government subsidies prohibited by the WTO."

"Today's decision should end Boeing supporters' attempt to derail the tanker competition by arguing that the trade dispute is one-sided," Shelby said in a statement.

On the other side, Senator Pat Roberts of Kansas said: "Attempts to skew this ruling in the EU's favour are an exercise in distraction. Once this ruling is made public in the near future, the sunshine will refute much of the claims by the EU and truly indicate where the market-distorting benefits flowed."

With no end to the litigation in sight, both sides have periodically called for a negotiated end to the dispute, as EU Trade Commissioner Karel De Gucht did in September when an interim version of the report was issued.

His spokesman said on Monday the report confirmed those initial findings, in comments suggesting Brussels was not keen to raise the stakes, or wanted to play down a previous WTO ruling that condemned its own support for Airbus.

"This solid report sheds further light on the negative consequences for the EU industry of these U.S. subsidies and provides a timely element of balance in this long-running dispute," spokesman John Clancy said in a statement.

One EU diplomat said a political solution was preferable.

"Given the state of the global airline industry today, a political agreement is important for both sides of the Atlantic," the diplomat said.

The ruling, like the interim report, was handed only to the parties. It will not be published for several weeks while being translated into French and Spanish.

U.S. Trade Representative Ron Kirk's office said it could not provide detailed comment now as the report was confidential.

"Despite that the EU has publicly commented on the report, at this time we will simply say that the United States is confident that the WTO will confirm the U.S. view that European subsidies to Airbus dwarf any subsidies that the United States provided to Boeing," spokeswoman Nefeterius McPherson said.

MASSIVE SUBSIDIES

Airbus said the report would show Boeing had received billions of dollars in illegal subsidies, depriving Airbus of $45 billion in sales, an indication of what the EU could seek in sanctions if the case moved to retaliation.

But Boeing disputed Airbus's figures and said the ruling would not require any change in policy or practice as far as Boeing was concerned.

WTO experts found last year that Airbus received illegal export subsidies from European governments and both sides have appealed against that ruling.

Appeals involving prohibited export subsidies are supposed to be dealt with in 60 days under WTO rules, but this case is so complicated that the WTO's appellate body has said it will not come to a conclusion until some time this year.

Boeing says the research and development grants it received pale into insignificance beside the support for Airbus.

In the Airbus case, WTO judges found the company had been able to launch a series of passenger aircraft only thanks to the government support and called for an end to export subsidies.

Both sides have an interest in clarifying the rules for how governments can facilitate the development of new aircraft in a fair manner.

It could take until much later this year for the appeals process in both cases to run its course, but the two governments, aware that Brazil, Canada, China, India, Japan and Russia have an eye on the market, are eventually likely to negotiate a settlement. (Additional reporting by Kyle Peterson in Chicago; Editing by Mark Trevelyan, Gary Hill)

http://www.reuters.com/article/2011/02/01/uk-trade-boeing-idUKLNE70U03N20110201

Apr 1, 2011

By Robert Wall

The World Trade Organization has determined that Boeing benefited from state aid that violates international trade rules to the tune of several billion dollars.

In publishing its findings on the case the European Union brought against the U.S. (DS353), the WTO did not calculate the entire level of harm done by the illegal state aid, which it will do later, but found that assistance provided by NASA, U.S. federal and state governments and the U.S. Defense Department (DOD) all benefited Boeing in a way that was not acceptable.

The ruling on DS353 states that �(a) the panel estimated the total amount of these subsidies between 1989 and 2006 to have been at least $5.3 billion; (b) the FSC/ETI [extra-territorial income and foreign sales corporation provisions of the U.S. tax code] and successor act subsidies constituted prohibited export subsidies; and (c) some of the specific subsidies (i.e. the NASA and DOD aeronautics research and development subsidies, the FSC/ETI and successor act subsidies and the Washington state and municipal business and occupation tax subsidies) caused adverse effects to the European Communities� interests in the form of serious prejudice, finding that the effect of these subsidies was displacement and impedance (or threat thereof) of Airbus large civil aircraft from third-country markets, significant price suppression and significant lost sales.�

However, the WTO also �rejected the European Communities� claims that (a) the other challenged measures constituted specific subsidies and/or that they caused serious prejudice; [and] (b) the Washington state taxation measures enacted under HB 2294 were prohibited export subsidies.�

The WTO, in an earlier ruling on a U.S. claim, ruled that Airbus received illegal state aid. That case is under appeal.

The case against the U.S. is also set for appeal. In fact, the EU is looking to appeal the case quickly, although officials suggest they are happy with the overall result. The move to file an appeal quickly is largely tactical. The European side has been frustrated that the U.S. offensive case is several months more advanced, which the EU believes is a handicap in the public debate. Appealing the case quickly should reduce the gap; the U.S., which is likely to appeal as well, would otherwise have weeks to lodge its appeal.

Boeing and Airbus are now left to squabble over whose subsidies are more egregious. Airbus says that if the effect of the subsidies were translated into the actual level of competitive harm done, the figure would be $45 billion. Boeing says Airbus is receiving $20 billion in aid, while the WTO links $2.7 billion in aid to Boeing. The WTO will settle that issue once the appeals process is exhausted and the matter moves to the enforcement stage.

The WTO appeals body is expected to issue its ruling on the case against Airbus in the coming months.

http://www.aviationweek.com/aw/generic/story.jsp?id=news/avd/2011/04/01/03.xml&h...

Boeing: WTO Ruling Exposes Massive Airbus Advantage From Illegal Subsidies
- Trade court rejects nearly 80% of EU claim of improper support for Boeing; finds no U.S. equivalent for billions in illegal European launch aid provided to Airbus
- Final rulings in U.S. and EU cases now public; findings show Airbus received more than $20 billion in impermissible funding versus $2.7 billion for Boeing.
- Boeing reiterates call for Airbus to fund A350 and other new programs on commercial terms, and remedy prohibited export subsidies on the A380

CHICAGO, March 31, 2011 /PRNewswire/ � A World Trade Organization final case ruling published today confirms the massive market advantage Airbus has enjoyed from billions in illegal government subsidies provided to fund the company�s commercial airplane product line since its inception more than 40 years ago.� �� �

�This WTO ruling shatters the convenient myth that European governments must illegally subsidize Airbus to counter U.S. government assistance to Boeing,� said J. Michael Luttig, Boeing (NYSE:BA) executive vice president and general counsel.� �The ruling rejects 80 percent of the EU�s claims against the U.S., finding no more than $2.7 billion of impermissible subsidies to Boeing not previously remedied. That amount includes $2.6 billion in NASA R&D funding, which is but a small fraction of the total amount challenged,� Luttig said.

Today�s ruling resulted from the European Union�s attempt to counter a U.S. case that successfully challenged illegal subsidies to Airbus.� Last June, the WTO upheld approximately 80% of the U.S. claim, finding Airbus had received more than $20 billion in illegal government subsidies, which harmed the U.S. aerospace industry and resulted in the loss of billions in exports and tens of thousands of U.S. jobs.�

Illegal government subsidies to Airbus included:

� � * $1.5 billion in R&D subsidies,
� � * $1.7 billion in infrastructure subsidies,
� � * $2.2 billion in equity infusions, and
� � * $15 billion in launch aid (including $4 billion for the A380) � a subsidy that is unique to Airbus and is the most pernicious and market-distorting subsidy under the law.

�Comparing today�s decision with the decision last June reveals a market distorted by Airbus� practices, with illegal launch aid being the key discriminator,� Luttig said. �The WTO ruling on launch aid goes to the heart of the Airbus business model, which now must change. In contrast, there are no comparable findings or consequences to the U.S. or Boeing from today�s decision, as the WTO has now fully and finally rejected most of the EU�s claims.�

Both sides may appeal today�s ruling. Once any appeal concludes, Boeing will support whatever steps the U.S. government deems necessary to fulfill its WTO obligations, and expects the same commitment to compliance from Airbus and its sponsor governments.

�Illegal launch aid must end. Airbus must take immediate steps to withdraw the outstanding prohibited subsidies provided to the A380, and it must finance the A350 and all other future programs on commercial terms,� Luttig said.

�With $16.6 billion of cash on hand, EADS/Airbus can, and now must, develop its products without illegal government subsidies,� he added.

Luttig said the WTO had done an outstanding job adjudicating the subsidy dispute.

�An impartial arbiter has spoken, and has set important precedents for all nations with ambitions to grow their aerospace industries. Compliance with WTO rules is essential to fair play and to the public�s confidence in the global trading system,� he said.

Source: Airbus and Boeing


http://www.aviationnews.eu/2011/03/31/airbus-wto-condemns-massive-illegal-boeing...