FACTBOX: Arguments in Airbus-Boeing subsidy row

Fri Sep 4, 2009 9:48am EDT

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(Reuters) - The World Trade Organization is due to give a preliminary ruling on Friday in a long-standing dispute between the United States and Europe over aircraft subsidies.

Here are some of the arguments in the case (information from a variety of sources, for simplicity grouped as "U.S." or "EU").

FRAMEWORK

The United States and European Union made a bilateral accord on support to the large civil aircraft industry in 1992.

Washington pulled out of the agreement in 2004 on the grounds that European subsidies infringed it and asked for WTO consultations that later led to a lawsuit at the trade body.

The EU says the U.S. withdrawal from the pact was invalid and filed a counter-suit at the WTO.

SUBSIDIES

Each side says the other is paying illegal subsidies to its respective civil aircraft maker. The U.S. says the EU and four member states --- France, Germany, Spain and Britain -- are paying subsidies to Airbus in the form of development loans that the United States describes as European "launch aid."

The EU says Boeing benefits from grants disguised as research contracts from the U.S. aerospace agency NASA and the Defense Department, and from tax breaks in some states.

* The U.S. says Airbus has received launch aid since 1970 of $16.7 billion, made at zero or below-market interest. With market interest this would now work out at $205 billion.

* The EU says the government loans or "reimbursable launch investment" -- it rejects the "launch aid" tag -- was made at market rates. It says it has repaid over 7 billion euros and that since 1992 it has repaid 40 percent more than it borrowed.

* The U.S. complains Airbus can set the break-even point for aircraft sales below which it does not need to make a repayment.

* The U.S. says that development funding for some models also broke WTO rules because it depended on export performance.

* The EU says Boeing received $10.4 billion from NASA over 30 years and $2.4 billion from Defense over 15 years in research and development contracts that were effectively covert grants.

* The U.S. says these figures are simply parts of the budgets for the two agencies including government overheads and payments to other private contractors and it is wrong to treat them as money given to Boeing. Boeing received only $750 million from NASA and about $500 million from Defense.

* In any case these were services purchased by NASA, and such purchases are within WTO rules, the U.S. says.

* The EU says that Boeing received tax breaks and other aids from state and municipal governments that amount to subsidies. For instance a package from Washington state amounted to $4 billion. This includes a clause where if any element cannot be delivered, Boeing will receive the equivalent in some other way.

* The U.S. says tax arrangements at the state level were not specific to Boeing. Washington state sets taxes by industry and it cut aerospace to bring it into line with other sectors.

* The EU says some state bond programs were designed to fund Boeing. One was even known as "Boeing bonds."

* The U.S. says this is a misrepresentation and the programs were used by many companies from various sectors.

INFRASTRUCTURE

Both sides also argue that each benefited from infrastructure investments amounting to hidden subsidies.

* The U.S. says Germany subsidized Airbus by creating a 751 million euro site in Hamburg for its double-decker A380. The EU says this is an industrial park serving several companies.

* The EU says Boeing benefited from work in Washington state including a rail and barge terminal over which it would have priority. The U.S. says new infrastructure is open to all.

RESEARCH

* The U.S. says the European Commission, Airbus governments and some regions subsidized Airbus by giving it hundreds of millions of euros in grants and loans to underwrite research. It says the EU has refused to provide information on most of this.

* The EU says its R&D support is co-financed by industry and respects the 1992 accord.

* The EU says much of the research ordered by NASA did not benefit NASA but was designed to help Boeing projects.

* The U.S. says that unless there are national security concerns the research is made publicly available, such as fuel-saving winglets first used on Airbus planes.

* The EU says military technology can help in the manufacture of civil aircraft. It cites reports that Boeing's 787 Dreamliner includes military hardware and that Boeing scientists simply repeated experiments they had done for military research to circumvent the U.S. rules.

* The U.S. says military technology cannot be used on civil jets. It is incompatible and/or U.S. law would forbid exports.

PRICE-CUTTING

Both sides accuse the other of aggressive pricing of plane sales, causing damage and depriving the home side of business.

INJURY

To win its case, each side must not only prove that the other paid subsidies, but that these caused damage to itself.

* The U.S. says Airbus subsidies coincided with the exit of Lockheed and McDonnell Douglas from the civil market and resulted in Airbus overtaking Boeing in deliveries in 2003.

* Airbus says it can show targeted and specific damage in certain markets. It says subsidies of $5 billion in 2004-2006 allowing Boeing to depress prices and bring forward the launch of its 787 Dreamliner damaged Airbus to the tune of $27 billion.

NEGOTIATIONS

Both sides have said in the past that the dispute will probably ultimately be resolved by negotiations.

* The U.S. says it believes a negotiated settlement bringing an end to WTO-inconsistent subsidies would be best.

* The EU says it would welcome negotiations, but will not accept preconditions forcing it to renounce state loans first.

* The U.S. says it has no preconditions, but if the EU insists on keeping "launch aid" in its present form any negotiations are unlikely to be successful.

(Reporting by Tim Hepher in Paris and Jonathan Lynn in Geneva)

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