By Richard Waddington

GENEVA, March 20 (Reuters) - Washington and Brussels faced off on Tuesday at the World Trade Organisation (WTO) in a row over alleged illegal subsidies to big planemakers, the largest dispute ever to come before the global trade arbitrator.

A panel of trade judges began the first in a series of closed-door hearings on a U.S. complaint that the EU has given billions of dollars of banned assistance through so-called launch aid to Airbus (EAD.PA: Quote, Profile , Research), the loss-making European concern.

The EU has brought similar accusations against what it sees as illegal state help for Boeing (BA.N: Quote, Profile , Research), Airbus's U.S. rival. Hearings in that parallel case are due to begin in July.

Airbus Aid Terms Are `Intolerable,' U.S. Tells WTO
By Warren Giles

March 21 (Bloomberg) -- The U.S. accused Airbus SAS of benefiting from ``intolerable'' government aid to develop new aircraft as the World Trade Organization began a hearing on the planemaker's dispute with Boeing Co.

The European Union and the U.S. lodged tit-for-tat challenges at the WTO in October 2004 over aid given to Airbus and Boeing. Together, the cases are the largest ever to go before the Geneva-based trade arbitrator. Efforts to resolve the clash by replacing a 1992 accord that sets limits to government financing for the planemakers have failed.

``Subsidies have enabled Airbus to develop a full family'' of airliners ``targeted at its U.S. competitors,'' the U.S. said at the hearings, which began yesterday. ``It is not tolerable'' that ``one producer should have ready access to billions of dollars in up-front, risk-free financing'' to develop airplanes.

The U.S. calculates that Airbus, the world's biggest commercial aircraft maker, would have paid $100 billion more for its loans at commercial rates than under the terms of its subsidized borrowing. The zero-interest repayments, conditional on the commercial success of Airbus models, have cost thousands of U.S. jobs and cut into Boeing's earnings, the U.S. said in its 72-page statement at the WTO.

EU Attacks Boeing's `Massive' $24 Billion Subsidies
By Warren Giles

March 22 (Bloomberg) -- Boeing Co. has benefited unfairly from ``massive'' subsidies such as research grants, credits, tax breaks and Department of Defense contracts that have added $23.7 billion to the planemaker's coffers, the European Union said.

Boeing and Airbus SAS, the world's biggest maker of large civil aircraft, challenged one another's government financing for developing new aircraft at the World Trade Organization in October 2004. The largest-ever WTO cases followed the collapse of a 1992 accord that set limits to government financing.

Today's EU filing at the Geneva-based trade arbiter ``exposes in detail the massive, longstanding and WTO- inconsistent subsidization of Boeing's civil aircraft division,'' the European Commission, the 27-nation bloc's executive, said in a statement.

Boeing has benefited from research work reimbursed by NASA and the Department of Defense at no cost for technologies used in the 250-seat 787 Dreamliner, according to the commission. The planemaker is also permitted to use resulting patents, has earned tax export exemptions worth $2.2 billion since 1989 from a measure already ruled illegal by the WTO and has gotten exemptions or breaks from the states of Washington and Kansas worth $4.9 billion, the EU submission says.

Payments for Services

Charlie Miller, a Boeing spokesman, denied the EU's claims, saying the ``vast majority of the alleged subsidies are payments to Boeing for services rendered to the government.'' Even if the EU's arguments had merit, he added, ``the alleged subsidies are dwarfed by the magnitude of the subsidies Airbus has benefited from.''

Toulouse, France-based Airbus says it's repaying loans at a rate of as much as 400 million euros ($534 million) a year, and the financing was expressly allowed under the 1992 deal with the U.S. and therefore can't be attacked. Airbus says it has repaid 40 percent more than it's borrowed from EU governments since 1992, and a total of 7 billion euros to date.

Airbus is repaying its debts to the U.K., Germany, Spain and France at commercial rates of 1 percent above cost, according to the EU. The European Investment Bank offered loans at commercial rates to Airbus and has also financed purchases of Boeing models by airlines including Ryanair Holdings Plc.

No Merit

``The EU's case is intended to draw attention away from the EU's massive subsidization of Airbus,'' Gretchen Hamel, a spokeswoman for the U.S. Trade Representative's office in Washington, said in an e-mail. ``Its claims in this dispute lack merit'' because some of the EU's challenges aren't related to civil aircraft or are financing programs available to a ``broad range of companies.''

The U.S. calculates that Airbus would have paid $100 billion more for its loans at commercial rates than under the terms of its borrowing from European governments.

Airbus has challenged that number and says U.S. research funding, infrastructure payments or tax breaks are grants that cost Seattle, Washington-based Boeing nothing under any terms.

``If we felt similarly unconstrained by mathematical honesty, we could come up with figures for the U.S. subsidies in the trillions because Boeing never repays anything,'' Rainer Ohler, a spokesman for Airbus, said by telephone. ``They must have come up with this figure while gambling in Las Vegas.''

WTO judges are expected to make an initial, confidential ruling on the Airbus aid in September, according to legal timetables, and a preliminary decision on the EU's complaint against Boeing early next year.

They are not subsidies. In any event, even if all of the EC (EU) allegations had merit - which they don't - they are dwarfed by the magnitude of the subsidies that Airbus has benefited from.

And your point being?

Those partners/Govts were/are not compelled to provide such assistance, and Boeing certainly didnt publicly lobby for it either.

On the other hand, in the other thread here, you have Airbus *demanding* money for a project destined never to earn a dime on the $16bn+ outlay?

Pot, Kettle, Black, ironic and a plethora of other expletives spring to mind

I think the word publicly lobby is important one...you are native to think that the support offered by the national governments of the development partners did not have an influence on the selection decisions.

Also don't forgot that Washington state offered a very substantial support package to ensure that the final assembly of the 787 remained in Everrett and not some where else in the US.

Both manufactures are equally good at extracting financial support wherever they can...it simply is good business

Seeing that Boeing have adopted the moral high ground on government support, why don't they offer to recredit the governments of Japan and Italy etc. with all the money they have given their partners ?

Influence like the SU A350 deal?
Door swings both ways dude.

And just how much in tax breaks and otehr incentives has Airbus equally had? I dont hear them "confessing" these either at the WTO

Why should Boeing refund soveriegn states own investment?

Its their own money, and they'll reap whatever benefits/loss associated with their respective choice of investment. If anything, your example is better suited to Airbus, which has yet to repay the taxpayers in full across the EU for the last 25 years for systematic rape of the public purse

My point is this, clearly Boeing is benefiting from the very same state support that the EU states have given Airbus.

Why should Boeing refund soveriegn states own investment?

I'm not saying B is not helped by tax breaks but, there is a big difference in tax breaks vs being giving billions of dollars to develop aircraft.
Boeing still has to go to the open market and it's own reserves to develop new ACs. A lot of a lot more risk there instead of some loan that might or might not get paid back!
I haven't heard of AB betting the company yet on a new AC, where as B has done it time after time.

I'm not saying B is a white horse that won't take advantage of these types of deals. But not once has B gone to our government and said loan us a few billion at less then prime rates so we can build a AC to sell on the open market, and by the way can you also give us a few more billion so we can subsidize the dollar. US tax payers won't mind if we don't pay it back for 20 years or maybe never, would they?

Down to the wire: US-EU Airbus-Boeing subsidies case moves ahead

The US-EU dispute over subsidies for Airbus and Boeing is moving to a conclusion that could reshape civil aircraft development. Is there still an off ramp?

When the US government took its dispute over Airbus subsidies to the World Trade Organisation in October 2004, Boeing was lagging its European rival in airliner orders, deliveries and backlog.

Today, the US manufacturer is ahead in orders and catching up on deliveries, Airbus has financial difficulties and the WTO dispute has slipped down the headlines.

But the rival cases over subsidies for Airbus and Boeing are continuing on their inexorable paths to rulings that are widely expected to find funding mechanisms on both sides of the Atlantic to be illegal under WTO regulations - findings that may not alter the dynamics of the Airbus versus Boeing battle, but which could change forever the way commercial aircraft programmes are financed.

^

Oversimplified to fit the point you want to make.

Part of the frustration I feel about the subject.

^

Boeing has been doing a lot of things right the last few years, no doubt. They have also taken the direct subsidies to a new level at the same time they are reaping the benefits from what probably is the best indirect support ever. In an unusual twist they are also receiving tremendous benefits from partnering with companies receiving substantial subsidies. I do not like it but understand the reasoning for all of these subsidies and accept it as the way the game is played.

What I do not understand is why subsidies given to Airbus are so bad when all they really are is packaged differently. I doubt anyone on this board have all the data to do an accurate assessment of both sides, heck, I doubt anyone anywhere can do an accurate assessment of one side but I do believe when it comes down to total benefits Boeing is not far off and it would not surprise me if they are ahead. For example: How do you accurately measure the benefits of being paid to do research that mainly benefit you but also some or all of your competitors? How do you measure the benefits of contracts with guaranteed profits even if you run over budget? How do you measure the benefits of getting a substantial share of the world's largest military spending? A share that is four times bigger than the principal Airbus countries. Accepting this is as just being business savvy is sticking the head in the sand.

Isn't it interesting that the company you claim is a "viable commercial entity with an emphasis on creating value for its shareholders" has almost the same (actually just lower) EBITDA percentage of revenue over the last three years (couldn't find older Boeing numbers) even though EADS had an absolutely horrible 2006?

Perhaps this can be broken down into smaller bits and addressed subject-by-subject. Where to start? Ok, I'll start with item one, and it can be a dynamic list that people can add to:

1) Government backed loans:

Airbus $???
Boeing $0.00

What next?

Oversimplified to fit the point you want to make.

Part of the frustration I feel about the subject.

Perhaps this can be broken down into smaller bits and addressed subject-by-subject. Where to start? Ok, I'll start with item one, and it can be a dynamic list that people can add to:

1) Government backed loans:

Airbus $???
Boeing $0.00

What next?

As far as "contracts with guaranteed profits even if you run over budget", the implication here is that Boeing (and other companies doing business with the US government) can somehow get away with murder...I think the Air Force Tanker procurement scandal dispels that myth.

And last but not least, your EBITDA comment I believe proves my point: Boeing is financially competitive with a company that does not have the same pressure to deliver value to its stockholders!

EU Rejects U.S. Claim of $205 Billion Aid to Airbus

By Warren Giles

July 24 (Bloomberg) -- The European Union said a claim by the U.S. that Airbus SAS, the world's biggest maker of large commercial aircraft, has benefited from government loans of as much as $205 billion since 1967 is ``completely unrealistic.''

Boeing Co. and Airbus filed reciprocal complaints against one another's government financing for developing new aircraft at the World Trade Organization in October 2004. Today, the two sides hold their final face-to-face hearings in the U.S. complaint against Airbus in Geneva. The cases are the biggest ever filed at the trade arbiter.

The U.S. ``is actively trying to `sell' this vastly exaggerated amount'' of $205 billion, the European Commission, the EU's executive arm, said today in a statement. The calculation is ``contrary to accepted wisdom, practices and the WTO subsidies agreement.''

The commission said the U.S. estimate for ``launch aid'' compounds interest on subsidies, making the value eight times bigger than the market value of Toulouse, France-based Airbus and 12 times greater than the $18.4 billion net assets of parent European Aeronautic Defence & Space Co., Airbus's parent company.

Applying the same method as the U.S., the commission said Boeing received $305 billion, rather than the $23 billion that the commission has filed in its legal submissions.

Launch Aid

``The debate used to be whether launch aid is a subsidy,'' said Bob Novick, a partner at law firm Wilmer Cutler Pickering Hale and Dore LLP, who advises Boeing. ``Now we're far beyond that because it appears the commission isn't contesting that it's a subsidy, only the extent to which it's subsidizing,'' Novick said in a telephone interview from Geneva.

Airbus is repaying loans at a rate of as much as 400 million euros ($553 million) a year, and the financing was expressly allowed under a 1992 deal with the U.S. and therefore can't be attacked, according to the commission. Airbus says it has repaid 40 percent more than it has borrowed from EU governments since 1992, and a total of more than 7 billion euros to date.

``Whatever the value of launch aid, it would have had an impact on the financial performance of Airbus because at the time these planes couldn't have been launched on the same terms without it,'' Novick said.

Airbus is repaying its debts to the U.K., Germany, Spain and France at a rate of return 1 percent above cost.

Governments have tried to limit Airbus's loan-repayment window to as few completed aircraft as possible, an EU official, who declined to be identified by name, told reporters today in Geneva. In the case of the A320, that figure was 600 aircraft, the official said, for the A330 and A340 the number was 750 aircraft, and for the A380, the number is 500, he said.

A ruling in the U.S. case against Airbus is expected in December, with a decision from arbitrators in the EU's filing against Boeing due in June next year.

EU Criticizes U.S. Over Boeing Subsidies

Tuesday July 24, 7:00 am ET

By Bradley S. Klapper, Associated Press Writer
EU Criticizes U.S. Defense of Alleged Boeing Subsidies

GENEVA (AP) -- The United States submitted a weak defense of the billions of dollars it pays in subsidies to Boeing Co., the European Union said Tuesday as the two sides began World Trade Organization hearings over their rival claims of illegal financing for airplane makers.

Brussels also rejected as "absurd" a US$205 billion (euro148.3 billion) evaluation by Washington of the benefit France-based Airbus has received as a result of European government support. The U.S. accuses the company of receiving billions in so-called launch aid from the bloc and its member states, which would have amounted to much higher costs if the loans were given at commercial rates.

"This 'estimate' is completely unrealistic," the 27-nation EU said in a statement, adding that the US$205 billion figure is more than 12 times the total net assets of Airbus' parent company European Aeronautic Defence & Space Co. NV.

"If the U.S. methodology were to be applied to the massive federal, state and local subsidies benefiting Boeing, the amount challenged by the EU would be not US$23 billion (euro16.6 billion), but rather US$305 billion (euro220.7 billion)," the EU said.

The trans-Atlantic dispute, expected to be the most complicated and costly in the Geneva-based WTO's 12-year-history, depends on the ability of Washington and Brussels to show that the alleged subsidies have caused their industries harm. Both have presented evidence of lost plane sales or lowered prices to back up their claims.

The EU cites tax breaks, development funding and outright grants to Boeing as examples of wrongdoing by the U.S. and certain American states. It accuses Washington of providing vast amounts of hidden support to Boeing through military contracts.

"For NASA (research and development) programs in particular, these are sham transactions whose objective is solely to support the U.S. aeronautics sector/Boeing in very specific areas of research, with the resulting R&D being applied to Boeing aircraft models," the EU said.

It criticized a July 6 submission by Washington to the WTO investigative panel examining the EU's claims, for failing to address a number of the illegal subsidies paid to Chicago-based Boeing.

While the U.S. acknowledges in the submission that Boeing received US$2.2 billion (euro1.6 billion) in export tax breaks under the now-repealed "foreign sales corporation" measure it ignores how a transitionary period would allow the company to continue benefiting in breach of WTO rules, the EU said.

It also rejected U.S. attempts to escape questions about its payments by invoking national secrecy or by arguing that U.S. government procurement rules are so strong they would prevent any defense or public research funding from being used for civil aircraft.

The U.S. declined to immediately comment. It has refused to make public its WTO submission, saying it still needs to remove any confidential business information it may include.

The dispute began three years ago when Washington pulled out of a 1992 agreement with Brussels on plane subsidies. The WTO is due to issue its first report in the U.S. case against Airbus in December, and the EU case against Boeing in June 2008.

Both dates may slip due to the complexity of the cases. It appears, however, that no compromise is in sight.

"I think we have to assume at this stage that the WTO will adjudicate this dispute," said Peter Power, spokesman for EU Trade Commissioner Peter Mandelson. "We have not received any signal from our American friends that they would prefer a negotiated outcome."

Airbus delivered the most planes last year, but fell behind Boeing on orders for the first time in six years and has suffered from a series of production setbacks and leadership crises. Airbus still has to work out how it will fund the development of its midsize, long-range A350 XWB, which is meant to meant to challenge Boeing's 787 Dreamliner but has already undergone a costly redesign.

When the WTO rules on the case in front of it, I expect Airbus to be hurt a lot more than Boeing. That will be the proof of the pudding. Remember this case will be based on who violated the last agreement, not who got what kind of subsidy or how much.

Aboulafia of Teal Doubts Meaningful WTO Ruling on Boeing Claim July 25 (Bloomberg) -- Richard Aboulafia, an analyst at aviation consulting firm Teal Group, talks with Bloomberg's Catherine Yang from Washington about Boeing Co.'s claim to the World Trade Organization that Airbus SAS has benefited from government loans of as much as $205 since 1967 and the outlook for a WTO ruling. The two sides hold their final face-to-face hearings on the complaint in Geneva this week. (Source: Bloomberg)

GENEVA (AFP) - Airbus and Boeing, the world's two largest plane makers, said Friday they were prepared to hold talks on subsidy disputes filed before the World Trade Organization more than two years ago.

"It is a pity that Boeing chose the path of litigation. We are ready to negotiate at any time, but it takes two to tango," Airbus' director of European affairs Geoffrey Shuman told reporters in Geneva.

He spoke following meetings of a WTO panel set up to hear US charges of European financial aide to Airbus that could in principle lead to a ruling in December.

"The US say they are ready to negotiate but they tell us we first have to unilaterally give up reimbursable launch investment without any similar concession on their sides," he added. "We could not support the EU entering a negotiation on that basis."

Airbus and Boeing launched reciprocal complaints at the WTO over subsidies to the two companies in October 2004.

Previously, both parties had been bound by a 1992 treaty limiting subsidies to each of them.

The U.S. has accused Airbus of receiving US$15 billion (€10.9 billion) in launch aid from the 27-nation EU and its member states, which would have amounted to costs as high as US$205 billion (€150 billion) if the loans were given at commercial rates.

U.S. criticism of EU launch aid is "like the pot calling the kettle black," said Sandy Morris, analyst at ABN Amro in London.

"At least we understand the much-criticized government refundable launch aid. We can see it" on EADS' books, he said. "When you get to Boeing you can't see anything. But do we believe that they also benefit? Of course we do. EADS looks very transparent in contrast."

By Aimee Turner

The exact way in which the USA has gone about calculating the level of support for Airbus came under scrutiny last week as World Trade Organisation experts met to consider the latest transatlantic arguments over support for the European airframer.

In the latest exchange on 25 July, the international trade dispute panellists appointed to decide on the merits of the USA's case heard public statements from either side - the US Trade Representative and the European Commission - before entering into closed session the following day to consider the effect of aircraft pricing and subsidy calculation methodology.

The two sides took their dispute over the funding of large civil aircraft to the WTO, after the USA withdrew from the 1992 bilateral EU-US agreement in late 2004.

The USA challenges the granting of member state launch aid for Airbus aircraft, while Europe has complained of similar support mechanisms provided to Boeing.

PARIS (AFP) - The United States welcomed Monday an international agreement governing government financing of aircraft exports, saying it will "level the playing field for the US airline industry."

Members of the Organization for Economic Cooperation and Development and Brazil signed the agreement on aircraft export credits, the Paris-based OECD announced earlier Monday.

"The agreement, covering all types of civil aircraft, from jumbo jets to small planes and helicopters, concerns the interest rates, loan guarantees and other conditions applied to export credits for aircraft sales," an OECD statement said.

The US Treasury called the understanding, reached after more than two years of negotiations, "a significant international economic policy achievement."

"By requiring government financing to closely track the market, the understanding will allow civil aircraft sales campaigns to concentrate purchase decisions on price and quality, where US producers excel, rather than on the terms and conditions of official financial packages where subsidies can sway purchase decisions," the Treasury said.

"The understanding will also level the playing field for the US airline industry by eliminating or sharply reducing official financing subsidies available to their foreign competitors."

WASHINGTON (Thomson Financial) - Outside advisors to the Boeing Co predicted today that the US would successfully fend off the European Union's challenge in the World Trade Organization to alleged government subsidies received by Boeing.

Speaking to reporters, one advisor to the company said the EU is vastly overestimating the amount of money that the US government has paid to Boeing over the past 30 years. For example, he said the EU has counted 10.4 bln usd worth of payments to Boeing as a subsidy, but Boeing argues that it has only received about 750 mln usd in payments over the last three decades.

Company advisors also said this money should not be treated as an illegal subsidy under WTO rules, since it is money received for services it rendered to the Defense Department and NASA as a private contractor. The company argues that money received for services cannot be treated as a subsidy under WTO rules.

"There are some serious shortcomings in terms of the case that they've put forward," one advisor said.

The EU and Airbus Industrie, the large European civil aircraft manufacturer which is Boeing's competitor, have argued that Boeing also receives billions of dollars in aid through free government research and development. However, Boeing argues in return that much of this R&D is military, and that Boeing cannot use this technology on civil-use aircraft because of US export controls.

Boeing also rejects the idea that reduced taxes in the state of Washington should be seen as a subsidy, as the EU claims, since taxes in that state were lowered only marginally to a rate that is the same rate that other industries pay.

The company has noted that Airbus has outsold Boeing over the last few years, and has a larger order backlog than Boeing. WTO rules require the EU to show harm caused by subsidies in order to win the case, he said.

These arguments against the EU case have been made in full by the Bush administration in written submissions to the WTO, and are expected to be reiterated when the WTO dispute settlement panel meets on Wednesday and Thursday to hear oral arguments in the case. That case against the US is expected to result in a final decision by the summer of 2008.

The EU case lags a case that the US brought against European subsidies to Airbus. At the heart of the US case is the argument that the EU offers low and zero-interest rate loans that Airbus uses to launch new products, and which only need to be repaid after a successful launch.

The US case argues that EU subsidies to Airbus are as high as 200 bln usd, which Airbus has refuted. In contrast, the EU has argued that Airbus repays launch aid to the European governments that provide it, and notes that US subsidies to Boeing in the form of free government research and various federal and state tax breaks are never repaid by Boeing.

The US case is expected to reach a final conclusion by the end of this year or early next year, although the EU could decide to appeal it.

Boeing advisors said today that they would expect the dispute over aircraft subsidies to be settled at some point in the process, since the only other alternative is WTO-approved trade retaliation in the form of higher tariffs. These sources said it seems most likely that the two sparring governments would negotiate a settlement rather than allow these punitive tariffs to remain in place for too long.

Both sides in the dispute have said generally that they are open to a negotiated settlement, although EU member states so far have not given the European Commission -- which presides over trade policy -- a mandate to negotiate.

EU: Boeing Aid Cost Airbus $27 Billion

Wednesday September 26, 11:19 am ET
By Bradley S. Klapper, Associated Press Writer
EU Says U.S. Aid to Boeing Cost Airbus $27 Billion in Lost Revenue

GENEVA (AP) -- The United States' payment of what the EU has called illegal subsidies to Boeing Co. has cost rival plane maker Airbus $27 billion in lost revenues over the past three years, the European Union said Wednesday as WTO hearings over the trans-Atlantic dispute began.

Brussels added that Washington will have only itself to blame if the World Trade Organization rules next year that the U.S. has broken commerce rules in its financing of Boeing, which is embroiled in a bitter legal dispute with Airbus.

The U.S. said government contracts do not give the Chicago-based company an unfair advantage, and noted that Airbus has actually gained 20 percentage points of market share at Boeing's expense since 2000.

Globally, the market for planes is worth an estimated $3 trillion over the next two decades.

"The lavish subsidies ... allowed Boeing to engage in aggressive pricing of its aircraft which has caused lost sales, lost market share and price suppression to Airbus on a number of select markets," Brussels said in a statement as the hearings started. "The support clearly aims at weakening Airbus' position and competitiveness."

By Ted Austell

"Everyone does it, so let's be gentlemen and settle our dispute out of court." That's the gist of the arguments Airbus makes regarding the European Union-U.S. dispute over aerospace subsidies. Trouble is, everyone does not do it, if by "it" we mean the use of government "launch aid" to subsidize a private company in a manner that's inconsistent with the rules of the World Trade Organization.

European governments provide billions of dollars to Airbus each time it develops a new airplane. Every dollar of government launch aid that Airbus receives is a dollar less it needs to borrow from commercial lenders, or take from profits earned on sales of existing products — a fact that enabled Airbus to lower its prices and grab significant market share away from Boeing.

What's more, European government launch aid carries repayment terms other borrowers can only dream of. There is no repayment schedule of the kind imposed by commercial lenders. Repayment is pegged to airplane deliveries, which means Airbus has free use of the launch-aid money for considerable periods of time. Airbus begins repayment only when certain Airbus-defined delivery thresholds are met, and if those thresholds are never achieved, there is no obligation to repay the balance of the loan.

Government launch aid gives Airbus a significant competitive advantage, and it clearly is illegal under WTO rules.

Now, let's look at the U.S. practices the EU and Airbus allege to be "indirect" government subsidies to Boeing: government contracts, research grants and tax support.

Government contracts, including research contracts, are not illegal under WTO subsidy rules as long as the government is getting products or services in return for the money it spends. That has been the case with every contract Boeing has had with the U.S. government. In return for the payments received, Boeing has provided fighter jets, rockets, satellites, maintenance, training and other products and services to its government customers.

In no case has Boeing asked for, or received, government money to develop its commercial-airplane products. Boeing has fully funded with its own money all of the research and development costs associated with those products. As for tax support, the decision a few years ago by the state of Washington to lower the taxes it levies on aerospace companies to bring them more in line with the taxes levied on other industries is not an illegal subsidy by any WTO definition.

A handful of Airbus lobbyists, consultants and academics have raised another issue that is not a part of the EU case against the United States but which I will address here — and that is the issue of alleged Japanese subsidies to Boeing for the 787. Boeing's relationships with its Japanese suppliers are fully commercial in nature. Boeing has not received, and will not receive, any money from the government of Japan.

What's curious about the EU and Airbus arguments regarding these so-called "indirect" subsidies to Boeing is that all of the supports they talk about are supports Airbus itself receives. Airbus and its parent company EADS are large government contractors — and not just in Europe, but in the United States as well. Airbus and EADS also are big recipients of government R&D grants, for which European governments receive nothing in return.

Airbus and EADS take advantage of tax incentives in places like Alabama, Florida and anyplace else they are offered; and they use many of the same suppliers as Boeing in Japan, in Europe, in the United States and elsewhere. Maybe that is why the EU chose not to include the allegations against Japan in its case against the United States. Perhaps that also is why European officials have been reluctant to talk about new rules to govern such things as government R&D practices (unless, of course, they apply solely to the United States and not to Europe).

It is such unsubstantiated allegations and misleading statements about "indirect" government support that have made it so difficult to resolve the subsidy issue outside of the litigation both sides have brought to the WTO. The U.S. government and Boeing remain prepared to negotiate a settlement of this dispute. However, Airbus and its government supporters have shown great reluctance to give up the launch aid that has made Airbus so successful, despite the fact that the practice is clearly illegal.

One final point in closing: European launch aid sets a very bad example for other nations like China and Russia that have ambitions to be major players in the commercial-aerospace sector. Those countries are watching closely to see how this dispute plays out. It is in the long-term interests of both the United States and Europe to recognize the importance of, and fully comply with, WTO rules.

Ted Austell is vice president of international trade for Boeing. He is based in Washington, D.C.

10 minutes ago

WASHINGTON (AFP) - The United States and European Union should abandon their costly WTO feud over aircraft subsidies and negotiate a new trade pact, Airbus's US chief said Thursday.

Allan McArtor, chairman of Airbus North America, also accused US rival Boeing of using "offensive and totally inappropriate" tactics in a bid to win a lucrative US Air Force tanker project.

He said that then-Boeing boss Harry Stonecipher had pushed the US government into launching WTO action against the EU in 2004 as a "smokescreen" to divert attention from Boeing's own internal problems at the time.

"Finally the facts are coming to life," McArtor said at the National Press Club here, alleging that Boeing had received more than 24 billion dollars in US government subsidies "that are far out of bounds with WTO rules."

State support for the aircraft industry was "part of the DNA" on both sides of the Atlantic and would continue in some form whatever is decided by the World Trade Organization, the former US Air Force pilot said.

"Let's face it: if the WTO process plays out, we're going to end up negotiating something anyway," he said, calling for the EU and United States to update a mothballed trade pact of 1992 to detail their aerospace support.

"Why not skip the national histrionics and the lawyer-enriching trials and hearings and go right to the negotiating," McArtor said, while insisting that the EU and Airbus remained confident of their case at the WTO.

But this was unlikely to happen, he said, as long as Boeing is using the WTO dispute as the "centerpiece of their PR campaign" to win the refueling tanker deal, which could be worth up to 200 billion dollars.

Airbus-Boeing rivalry may extend to US Air Force contracts
By Stephen Trimble

The Airbus-Boeing rivalry for US Air Force contracts may stretch beyond tankers to new replacements for Lockheed Martin C-5-class freighters and Air Force One-class VIP transports.

Airbus North America chairman Allan McArtor confirms that the airframer has responded to two separate preliminary enquiries made last summer by the USAF's Air Mobility Command (AMC).

AMC's first enquiry was for data on the A380 Freighter as a military transport in the C-5-class, for which Airbus responded with a marketing brochure, and expects to follow up with a more detailed presentation, McArtor says. An industry source says the follow-up meeting could be scheduled for December.

Secondly, AMC invited Airbus parent EADS to respond to a market survey seeking options for a "VIP Large Aircraft Recapitalization [VIPLAR]", which is the first step in a process to replace three VIP transports. The USAF asked for data about three Airbus types - the A380, A340-600 and A330-200.

BRUSSELS (AP)--Officials from the U.S. and European Union will meet in Washington this week to discuss ways to cut red tape and give trans-Atlantic trade a boost.

The officials plan to discuss ways of easing a slew of regulatory headaches, including rules relating to toy safety, cosmetics testing and biofuel standards.

Guenter Verheugen, the E.U.'s commissioner in charge of industry policy, said he was optimistic the meeting Friday could help break down regulatory barriers hindering trade.

"What we can do is find political agreement between those in charge on both sides, and we have identified a list of concrete problems," Verheugen told reporters.

[...]

But he added that larger trade battles, such as subsidies given to the aircraft makers Airbus, a subsidiary of European Aeronautic Defence & Space Co. (5730.FR) and Boeing Co. (BA), wouldn't be discussed at this point.

EU sees Boeing-Airbus row running into 2009
STRASBOURG, France (Reuters) - A major transatlantic row over subsidies paid to Boeing (BA.N: Quote, Profile, Research) of the United States and rival European planemaker Airbus could drag into 2009, the European Commission said on Tuesday.

BRUSSELS (Thomson Financial) - US aerospace giant Boeing Co is unlikely to reach a negotiated agreement with European rival, the EADS-owned planemaker Airbus, in a long-running subsidies dispute between the companies, a lawyer for Boeing told Agence France-Presse.

The World Trade Organisation is set to rule on the Airbus case in April. "I would be surprised that we see a negotiated settlement before the ruling against Airbus is issued," said Robert Novick, a lawyer from the Washington-based WilmerHale firm which advises Boeing in the dispute.

A fresh round of hearings began on Tuesday at the WTO headquarters on the European Union's own complaint against what it claims to be Boeing subsidies.

Both Washington and Brussels launched simultaneous cases in 2004. A ruling is expected on the Airbus case around April, with a Boeing verdict seen six months later.

The EU claimed last September that US subsidies between 2004 and 2006 to Boeing had caused Airbus to lose 27 bln usd and were illegal under world trade rules.

The EU cases focus on research and development support it says the US Department of Defense and NASA provide to Boeing, as well as support from the states of Illinois, Kansas and Washington.

Novick rejected these claims as "grossly inflated." "The money coming from the (Defense Department) and NASA is not a subsidy but money paid for services rendered," he said.

The United States claimed in July that the overall support Airbus receives from European government loans for the launch of new models amounted to 205 bln usd.

Both companies -- which are not official parties in the WTO dispute, since the organisation only deals with trade complaints by governments -- have said they still want to settle their dispute through negotiations.

Wednesday January 16

By Bradley S. Klapper, Associated Press Writer
Airbus-Boeing Legal Dispute Suffers More Delays at WTO, Officials Say

GENEVA (AP) -- Verdicts have been further delayed in the U.S.-EU dispute over government support for rival plane makers Boeing Co. and Airbus, officials said Wednesday as the World Trade Organization began its final panel hearings.

The biggest commercial dispute ever -- in a market worth an estimated US$3 trillion (euro2 trillion) over the next two decades -- has also become the slowest in the 13 years of the WTO, as a result of numerous complications and tactical maneuvering since Washington and Brussels initiated complaints in October 2004.

The WTO set up competing panels a year later, giving them until July 2006 to complete their work. At least one investigation will definitely run over two years behind schedule.

Boeing officials said they believed a first, interim ruling could come as early as April in the U.S. case alleging that Airbus developed new planes and captured long-standing Boeing customers with the aid of billions of dollars in government loans at below market rates -- in violation of global trade rules.

A final verdict would then come out in June or July, said Bob Novick, a former U.S. trade official who advises Boeing on WTO matters. He said a ruling on EU claims of illegal tax breaks and outright grants to Boeing would trail by about six months.

By Jonathan Lynn

GENEVA (Reuters) - European planemaker Airbus does not expect an early resolution of its disputes about state aid with U.S. rival Boeing, even though the two will work together to promote better air traffic control, it said on Tuesday.

The European Union and the United States are pursuing competing complaints at the World Trade Organisation (WTO) over tens of billions of euros and dollars in state support provided to Boeing (BA.N: Quote, Profile, Research) and Airbus, a unit of EADS (EAD.PA: Quote, Profile, Research).

Airbus CEO Tom Enders said that while he expects the WTO to rule on the two cases later this year, a negotiated settlement with Boeing was unlikely before then.

Airbus had made a couple of approaches to suggest negotiations but they had not been fruitful, he said.

"I still believe that a really sustainable solution has to be negotiated," he told Reuters.

Either side has the right to an appeal, so the forthcoming decision is by no means the end. This will fester for years....