FACTBOX-EU appeal against WTO Airbus subsidy ruling

GENEVA, July 21 (Reuters) - The European Union said on Wednesday it would appeal against a ruling by a World Trade Organization panel that it paid illegal subsidies to Airbus EAD.PA.

The following are the main points challenged by the EU in its appeal.

* Export subsidies - The WTO panel found that launch aid paid by Britain, Germany and Spain for Airbus’s A380 superjumbo was a prohibited export subsidy, because governments anticipated exports when they granted the support.

- The EU will argue that launch aid contracts merely require repayment over a number of sales and are neutral as to whether those sales are exports or domestic. The interest payments are the same in both cases. So there is no incentive in launch aid for Airbus to favour exports.

* Launch aid - The panel found that 21 instances of launch aid granted to Airbus were subsidies because interest rates on the loans were below market rates.

- The EU argues that in some cases there was no subsidy at all, and in others the panel exaggerated the amount of subsidy.

- The EU will also appeal the panel’s findings that are based on interest rates calculated by the United States. This interest rate comprised the government borrowing rate -- effectively the bond rate varying from member state to member state, a corporate risk premium and a project-specific risk premium. The exact figures are confidential for business reasons but the EU says its estimate of the corporate risk premium for Airbus was less than half that estimated by the United States.

* Infrastructure - The panel found that infrastructure provided at Airbus plants in Hamburg, Toulouse and Bremen was a subsidy.

- The EU believes the panel confused the “creation” of infrastructure -- a core government function, with the “provision” of infrastructure, which can be a subsidy if provided below market rates. But it says Airbus paid a market rent or purchase price and so there was no subsidy.

* Equity infusions - The panel found that several injections of capital by the French government and transfer of the French government’s stake in Dassault to Aerospatiale were subsidies.

- The EU says these transactions reflected the behaviour of normal market investors based on Airbus’s strong prospects and independent valuations.

* Research and development support - The panel found that grants to Airbus under the EU Framework Programme were specific subsidies, not generally available to other firms, because of the existence of ring-fenced budgets for aerospace research.

- The EU argues that separate sectoral budgets in this programme exist precisely to avoid disproportionate use of the programme by certain sectors leading to specific subsidies.

* Adverse effects - The panel found that the subsidies enabled Airbus to take market share from U.S. rival Boeing BA.N on the EU and some export markets, while Boeing lost sales to Airbus.

- In particular the EU objects to the panel’s conclusion that no Airbus plane could have existed without subsidies, so any adverse effects suffered by Boeing are the result of subsidies. It believes many Airbus planes, such as the A380 superjumbo, could have been launched without subsidies.

- The EU will also argue that some of the panel’s findings on market share displacement are based on incorrect evaluation of data.

- It will also argue against the panel’s finding that there is a single market for large civil aircraft, rather than several different markets depending on size and capacity.

* Other issues

- The EU will appeal against some other “cross-cutting” findings, for example the impact of changes in ownership and the extraction of cash by shareholders on subsidies.

- It will also argue that subsidies made before 1995 cannot be part of a WTO dispute since the WTO agreement on subsidies only came into effect then.

- If the United States files a cross-appeal, which it has 12 days to do, the EU could then make further appeals conditional on that.

Source: EU Compiled by Jonathan Lynn; Editing by Mark Heinrich