U.S. presses EU on Airbus subsidy compliance

Fri Jan 13, 2012 9:47pm EST

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(Reuters) - The United States pressed the European Union on Friday for hard evidence that it has complied with a trade ruling on subsidies to planemaker Airbus in a showdown that could kick off the next stage in the world's largest and costliest trade dispute.

Officials from both sides said they met in Geneva to review the EU's response to a ruling by the World Trade Organization that the EU gave billions of dollars of unfair aid to Airbus, harming the interests of rival Boeing Co.

The EU's trade spokesman confirmed the two sides had held formal consultations but made no further comment. Afterward, the WTO announced on its website that an arbitrator had been appointed to assess the EU's compliance plan.

The EU said last month that it had complied with the request to repair European government loans deemed to contain subsidies, but it has not detailed its response to the 1,000-page trade ruling in as much depth as its opponents would like.

Washington rejected the plan and said it could ask for sanctions totaling as much as $7 billion to $10 billion annually.

Speaking during the Geneva meeting on Friday, a senior U.S. official said it wanted proof from the EU that it had rolled back subsidies for Airbus. If not satisfied, it would ask for a arbitrator to decide if the EU had complied, the official said.

Once that assessment is made, the EU could face a second arbitration over the amount of sanctions the United States is entitled to impose to offset the damage done to Boeing by European subsidies for Airbus, U.S. officials say.

Maggie Bergsma, a spokeswoman for Airbus, dismissed the action on Friday as just a "further procedural step" in a case that began in 2004 and "will continue for years before any party can raise a sanctions request."

The EU is awaiting the results of an appeal in a countercase in which the WTO found that the United States had also given unfair aid to Boeing through research or tax arrangements.

The two sides have squabbled for years over mutual accusations of aid to their aircraft industries -- which involve several hundred thousand jobs, including suppliers -- and cannot even agree over the scope of their dispute.

Washington wants Airbus to back down from using government loans for its next aircraft, the A350; but the EU says it is not covered by the case, and any loans would comply with WTO rules.

Due to be delivered later this decade, the A350 competes against Boeing's carbon-composite 787 Dreamliner.

Speaking to analysts last month, the chief executive of Airbus parent EADS hinted for the first time that the company could eat into its cash pile rather than tap new loans, which were intended mainly to share out the development risk.

"We have already sold 570 A350s; it means the risk is much more limited than at the beginning of the program and perhaps ... we have to look at your question to see if now there are not more advantages to investing our cash in the A350 development instead of getting reimbursable loans. That is clear; that is a question," CEO Louis Gallois said.

"For the time being we have chosen to stick to reimbursable loans, which are not unfair subsidies because there is absolutely no subsidy content in them, and that has been recognized by the WTO, and we don't want to lose this instrument, because we could need it in the future," he said, according to a recording released on the EADS website.

Airbus officials say the loan system was not itself faulted by the WTO and will be used for the A350 on WTO-compliant terms. Boeing says that every jet developed by Airbus has benefited from flawed loans and that only abolishing them would be sufficient.

(Reporting by Tim Hepher and Doug Palmer; Editing by Gerald E. McCormick and Stacey Joyce)

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Comments (1)
flier wrote:
This drawn out dispute highlights America’s dominant position in times gone by. It always formulated international laws to its advantage with expensive and time consuming “safeguards” of all kinds to protect itself. That drawn out legal process was and is a costly affair only a few countries could afford. Seen in this context, it is somewhat satisfying that Europe uses it now to its own advantage.

Jan 15, 2012 6:39pm EST  --  Report as abuse
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