U.S., EU skirmish at appeal over Airbus subsidies

GENEVA Thu Nov 18, 2010 11:50am EST

GENEVA (Reuters) - The United States and European Union traded blows at an appeal over EU subsidies for passenger jet maker Airbus, part of the world's biggest trade dispute.

In a recording broadcast on Thursday of statements to a World Trade Organization appeal court on November 11, the two sides sought to unpick each other's arguments while challenging findings by the original WTO panel that they disagreed with.

Both sides are appealing in the case brought by the United States against subsidies for Airbus passenger jets paid by the European Union and four of its member states.

A WTO panel ruled in June that the EU must axe prohibited export subsidies to Airbus, a subsidiary of EADS, that have injured its rival Boeing.

The panel found that Airbus had only been able to launch a series of jets thanks to subsidies from the EU and Britain, France, Germany and Spain.

"We are here today because the panel in this dispute found that the European Union and certain member states -- France, Germany, Spain and the United Kingdom -- gave massive subsidies for the development and production of Airbus large civil aircraft," a U.S. government trade lawyer told the appeal court.

"These payments together amounted to at least $18 billion. The European Union has shown no error with the panel's findings on these points."

WTO appeals look at only the points of law used by the original panel and how it interpreted them, rather than re-examining the rights and wrongs of the case.

"It is the panel's refusal to conduct the necessary analysis that the EU requests the Appellate Body to reverse," an EU lawyer said.

The European Union says the dispute -- and a counter-suit it launched against U.S. aid for Boeing planes -- can only be resolved through negotiations.

NEW RIVALS

Both sides are keen to establish fair rules for trade in large passenger jets, as other countries such as China, Brazil, Canada, Japan and Russia eye a market worth $1.7 trillion.

State-owned Commercial Aircraft Corp of China (COMAC) announced on Tuesday it had won a 100-plane order for its first commercial jetliner.

WTO cases are usually held behind closed doors, but both sides agreed to admit the public to the opening statements in the appeal, delaying the broadcast by a week to allow the parties time to remove commercially sensitive information.

The EU is appealing almost everything, from whether its payments amounted to illegal aid to whether they hurt Boeing.

The United States, which says it was broadly satisfied with the overall ruling, is seeking to overturn two points.

It disagrees with the way the panel found only three of the seven payments targeted by the United States were prohibited export subsidies.

And it wants the WTO to recognize the entire system of European support for aircraft, dubbed "launch aid" by the Americans, as a coherent subsidy program with implications for future aircraft, and not just a series of single payments.

The judges hearing the appeal are unlikely to issue their verdict until next year, following further hearings in December, missing an earlier deadline because of the complexity of the six-year-old dispute. But publication next month is possible.

The delay in the appeal was a disappointment to Boeing, which had hoped the Airbus case would be completed, and the illegality of Airbus subsidies confirmed, before the U.S. Air Force decides whether to pick Boeing or EADS for a refueling plane contract worth up to $50 billion.

The Air Force is due to decide by December 20 whether to pick a plane based on Boeing's 767, or an EADS option based on the Airbus A330.

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