* WTO found subsidies worth about $5 billion - US sources
* Confidential ruling may not be published until mid-2011
* Findings to determine US-EU aircraft row
(Updates with De Gucht comments, Boeing statement)
By Jonathan Lynn and Tim Hepher
GENEVA/PARIS, Sept 15 The European Union said
on Wednesday it had won a victory against U.S. subsidies for
Boeing (BA.N) that it hoped would set the stage for a
negotiated settlement that would allow European governments to
continue to help Airbus EAD.PA develop new aircraft.
"This was a very thorough analysis which in fact supports
our view in this dispute," EU Trade Commissioner Karel De Gucht
told Reuters during a visit to Argentina.
"I hope that everybody will be convinced that the right way
out of this is to have negotiations," De Gucht said after a
World Trade Organization panel issued its confidential report.
"The only way out of this dispute is in fact by finding a
negotiated settlement," he said.
Boeing said that if reports about the decision were
accurate, "then the ruling amounts to a massive rejection of
the EU case and confirms that European launch aid to Airbus
stands as the single largest and most flagrant illegal subsidy
in the aerospace industry."
The ruling follows WTO condemnation in June of illegal
European subsidies for Boeing rival Airbus, mostly in the form
of European government "launch aid" loans. It is the biggest
bilateral trade dispute ever before the WTO.
Two U.S. sources familiar with the case acknowledged the
panel found Boeing had benefited from federal and other
subsidies, but to a much lower extent than its European
They said the WTO had found subsidies worth about $5
billion, including $2 billion that already has been subject to
an earlier settlement.
The $3 billion or so in new subsidies were mainly linked to
payments provided to the planemaker by the American aerospace
agency NASA, the U.S. sources said.
But a European source said the EU prevailed in most of the
$24 billion of claims it had brought over allegations of unfair
federal, state and local aid to Boeing.
A second European source, this one a government official,
said whether the report found $5 billion or even $15 billion in
subsidies was not the important issue.
"Our reading is that this is an absolutely seminal victory
for Europe in the sense that Boeing has claimed for many years
they were a stock-listed company operating according to market
rules and they didn't violate the WTO, the official said.
"I think this report puts that straight by saying in equal
measure that U.S. subsidies to Boeing have damaged Airbus as
certain EU subsidies to Airbus have damaged Boeing," he said.
The report, issued only to EU and U.S. officials, will not
be made public until possibly mid-2011. Boeing's share price
closed a bit lower on Wednesday at $62.73.
NO COMPARISON, BOEING AND SUPPORTERS SAY
Boeing argued that any aid for which Washington was faulted
paled in comparison with subsidies for Airbus that were
denounced by the WTO in a ruling in a parallel case.
"Nothing in today's public reports on the European case
against the U.S. even begins to compare to the $20 billion in
illegal subsidies that the WTO found last June that Airbus/EADS
has received," the company said.
The company's champions in Congress -- including Washington
state Senator Patty Murray and Kansas Senator Sam Brownback --
said what they had been told about the ruling supported
"The two decisions are not in the same ballpark or even the
same league. Anyone who says they are isn't telling the real
story," Murray said.
But Alabama Senator Richard Shelby said the panel report
meant Boeing and its allies "can no longer rationally claim"
that only Airbus receives government support. "In fact, it is
quite the contrary," he said.
The divergent views reflect a hot competition between
Boeing and Airbus to build a fleet of U.S. Air Force refueling
tankers. If Airbus wins, it plans to assemble the planes in
U.S. trade officials insisted they have long been prepared
to sit down with the EU to negotiate a deal.
"We were interested six years ago. We were interested four
years ago. We were interested two years ago. And we're still
interested," said Nefeterius McPherson, a spokeswoman for the
U.S. Trade Representative's office.
TRADE RULES SAID BROKEN
One European source said the WTO judges had backed EU
complaints over some $17 billion in research contracts from
NASA and the Pentagon, and $4 billion in tax breaks from
The WTO judges found these payments broke WTO rules and
should be withdrawn, the European source said. The figures were
not cited in the report but were derived from adding the
respective claims, the source added.
The dollar value of a particular subsidy can overstate the
amount of damage its causes.
That said, "research and technical grants that are specific
to an airplane or a company are always going to be subsidies
because at the end of the day you cannot buy that investment in
the commercial marketplace," said one European source familiar
with the report.
The WTO dispute panel did not find that aid challenged by
the EU was prohibited -- as it did in a ruling in the parallel
case against Airbus subsidies brought by the United States.
If the aid had been ruled prohibited, it would have
required faster action by Washington to fix it, the source
President Barack Obama will attend the EU-US summit in
Lisbon on Nov. 20, providing an opportunity for the two sides
to discuss the dispute.
(Additional reporting by Laura MacInnis in Geneva, Doug Palmer
in Washington, Juliane von Reppert-Bismarck in Brussels and
Eduardo Garcia in Buenos Aires; Editing by Matthew Jones and