GO
Loading...

Boeing-Airbus Dispute: WTO Rules in Favor of US

AP
Friday, 4 Sep 2009 | 3:30 PM ET

The World Trade Organization on Friday handed the United States and European Union its long-awaited intial decision in their dispute over government financing for airplane makers.

An Airbus A380 in take off.
Rajesh Nirgude
An Airbus A380 in take off.

The WTO didn't reveal the result of the confidential ruling, but the The Wall Street Journal reported the trade body had ruled Airbus received illegal government assistance. The Journal, citing as its source a person familiar with the matter, said that launch aid packages for the giant A380 passenger jet had been ruled improper subsidies.

The trade body is ruling on a U.S. complaint that asserted Airbus received an unfair boost from billions of dollars in financing to develop new airplanes. The ruling could set important precedents on how far governments can go to support the aviation industry.

But appeals could take years, and the companies must wait for a decision next year in an Airbus challenge to what it sees as unfair U.S. government support for Boeing . The complexity of the two cases leads some observers to think the issue is ultimately more likely to be resolved by negotiations between the parties than by rulings.

Both Washington and Brussels confirmed they received the ruling.

"Because the interim report is confidential, we cannot discuss the contents," said Deborah Mesloh, deputy assistant U.S. trade representative in Washington.

Lutz Guellner, spokesman for the European trade commissioner, said, "It is a long document of more than 1,000 pages which we will study carefully."

The so-called launch aid was in the form of loans to Airbus that helped it develop new airplanes as it overtook Boeing as the world's top producer of commercial airplanes.

The WTO decision was treated with extreme secrecy, in part because of sensitive company information contained in it.

Breaking News: WTO Decision
World Trade Organization rules in favor of Boeing in dispute with Airbus, with CNBC's Phil LeBeau.

"In this dispute, the United States is challenging dozens of measures providing over billions of dollars in subsidies to Airbus, including launch aid to every major Airbus aircraft model," said Mesloh. "The dispute has proven to be one of the most complex and lengthy disputes under the WTO."

She noted that the United States maintains European governments have provided unfair subsidies to Airbus that harm U.S. interests.

One paper copy of the decision was handed to each side as well as one read-only copy on a computer disk. But WTO refrained from giving each side a digital version that could be passed on easily to others.

It is one of two main disputes in the Boeing-Airbus rivalry over what is projected to be a $3.2 trillion global aviation market over the next 20 years. In the other case, the Europeans maintain that the U.S. company benefited from government subsidies from the Defense Department and NASA.

Guellner said, "It is important to recall that this report is only half of the story, and we await the interim report in the case launched by the EU against the U.S., which we expect to be issued in a few months."

The case could be significant for China, India and Brazil, which are competing in the market for smaller regional jets and aspire to cut more deeply into the Boeing-Airbus dominance over big passenger planes.

If the WTO should give governments in the United States and Europe leeway to aid their aerospace industries, it could lead other nations to do the same.

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.

  Price   Change %Change
BA
---

Featured

Contact U.S. News

  • CNBC NEWSLETTERS

    Get the best of CNBC in your inbox

    › Learn More

Don't Miss

U.S. Video