America Files WTO Case Against the European Union Over Airbus Aid

America and the European Union, the world’s two largest trading partners, filed dueling complaints at the World Trade Organization, arguing that aid to aircraft makers Airbus SAS and Boeing Co. violates trade rules.“This is a landmark case, the biggest subsidy case at the WTO,” said a trade lawyer with the law firm of Hammond Suddards Edge in Brussels, Konstantinos Adamantopoulos.America said Toulouse, France-based Airbus has received more than $15 billion in government loans since 1967, helping it take the lead in aircraft sales. The E.U. claims Chicago-based Boeing got $23 billion in aid since 1992 through state tax breaks, military research, and Japanese subsidies to suppliers.The case threatens to disrupt the financing each planemaker taps to develop aircraft, such as Boeing’s new 7E7.It also escalates tensions between America and Europe and may mar their $400 billion trade relationship, which is already entangled in disputes over an American export tax break, an E.U. moratorium on genetically modified foods, and European customs procedures.“This is not a success of trans-Atlantic relations,” said the former E.U. ambassador to Washington and chairman of the European-American Business Council,Hugo Paemen.”But if you don’t use the WTO when you have a serious problem like this, what’s the use of the WTO?”The Bush administration began prodding the E.U. in July to rip up a 1992 bilateral agreement that spelled out rules on government aid to aircraft makers, and threatened a WTO case if the E.U. didn’t comply and end government loans to Airbus. Three rounds of talks failed to secure an agreement.“I’m fearful there will be more heat than light generated by this activity,” said Ralph Crosby,chief executive of the American arm of European Aeronautic, Defense & Space Co., the parent company of Airbus. He said it’s a “curious coincidence”that the case is being filed four weeks before the American election.The filings yesterday began a 60-day period of consultations between America and the E.U., a mandatory first step before America could request a WTO panel be formed to hear the case.“The E.U. and Airbus appear to want to buy more time for more subsidies for more planes,” American Trade Representative Robert Zoellick said in a statement. “That isn’t fair and it violates international trade rules.”Airbus sold 305 aircraft last year compared with Boeing’s 281, and Mr. Zoellick argued government aid that was once justified to help an “infant industry,” is no longer needed.Boeing said in a statement it “fully supports” the WTO case.The case “is obviously an attempt to divert attention from Boeing’s self-inflicted decline,” E.U. Trade Commissioner Pascal Lamy said in a statement. “If this is the path the U.S. has chosen, we accept the challenge.”America says loans from the British, French, and German governments helped Airbus take the title of world’s biggest planemaker away from Boeing last year. The WTO case couldn’t force the E.U. to rescind aid already provided, and instead could prevent aid to a new Airbus aircraft such as a competitor to Boeing’s new 7E7.The E.U. says Boeing took American government-financed technology intended for warplanes and used it to develop the 7E7, and is now relying on government-funded Japanese suppliers to complete that aircraft.“We urge the WTO to preserve a level playing field in commercial aviation,” said a spokesman for European Aeronautic, Rainer Ohler. “EADS and Airbus have always complied fully with current law.”Without a bilateral deal as cover, the E.U. and Airbus would be subject to the disciplines of the WTO, which is not forgiving of government policies that subsidize exporters. The WTO has ruled that the Brazilian and Canadian governments unfairly subsidized their aircraft makers – Empresa Brasileira and Bombardier Inc. respectively.“Both sides want to have a level playing field,” Mr. Lamy said in an interviewThursday while in Washington to meet with Mr. Zoellick. “European loans to Airbus are not the only aircraft subsidy.”American support for Boeing and European benefits for Airbus are governed by a 1992 agreement that America says should be replaced with a deal banning “new subsidies.”Boeing says Airbus doesn’t deserve cheap government loans, called “launch aid,” that may have been warranted a decade ago.Klaus Breil, senior fund manager at Adig Investments in Frankfurt, which has $6 billion under management, called the American complaint a preemptive strike because it fears the competition toward Boeing’s 7E7.The E.U. warns that the WTO complaints on aircraft could damage trans-Atlantic commercial relations and cause “mutual assured embarrassment,” and said the WTO would likely rule against aid to both aircraft makers.A WTO ruling against both European “launch aid” to Airbus and Washington state tax breaks to Boeing would be far better than a the status quo, a senior American trade official said in a conference call with reporters.European aid to Airbus in the form of government loans has totaled $15 billion since 1967, according to the U.S. The E.U. says American support for Boeing has amounted to $23 billion since 1992, although Boeing doesn’t get the same types of government loans to develop new aircraft.“Airbus has succeeded in commercial aviation and become the leading maker of passenger aircraft because it has focused on giving the market what it wants – better aircraft,” Mr. Ohler said. “Government funding never provided more than a level playing field.”

America Files WTO Case Against the European Union Over Airbus Aid

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