EU faces compliance deadline in Airbus spat with U.S.

Reuters News
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Posted: Dec 01, 2011 7:38 AM

By Doug Palmer

WASHINGTON/GENEVA (Reuters) - A dispute over government aid for aircraft rivals Airbus and Boeing Co enters a delicate stage on Thursday as Europe faces a deadline to tell the United States how it is eliminating billions of dollars in subsidies struck down by the World Trade Organization.

"It is by a huge margin the most commercially significant case the United States has ever prosecuted at the WTO," U.S. Trade Representative Ron Kirk said in a speech on Wednesday at the U.S. Chamber of Commerce.

The WTO found problems with European Union "launch aid" loans aimed at helping Airbus after the United States filed a complaint. A WTO appeals panel issued a final ruling against Airbus in May, giving the EU until Dec 1 to come into compliance.

EU Trade Spokesman John Clancy said the EU planned to send a document to the WTO and USTR describing how it had achieved compliance. Several trade sources said the EU would send the document at 5 p.m. Geneva time.

"We have always said that we would honor our WTO obligations and comply fully and on time. We have been working with the governments of France, Germany, Spain and UK, as well as with Airbus, on a series of steps that achieves just that," Clancy said in an emailed statement.

"This will be a substantial package. We expect that we receive an equally solid set of compliance measures from the United States once the WTO has finally ruled on subsidies to Boeing."

The EU has challenged some U.S. government programs to help Boeing at the WTO, but that case is still in the appeals stage, with a decision widely expected around March or April 2012.

U.S. officials contend the two cases show European governments have provided more assistance to Airbus than the United States has to Boeing over the years.

The United States will have to judge whether it thinks the EU has taken adequate steps to address the problems cited by the WTO. If Washington is not satisfied, and trade experts expect it will not be, it could begin proceedings at the WTO to impose trade retaliation, known in trade jargon as "suspending concessions."

Kirk told the Chamber that the United States was open to a negotiated settlement that addresses "WTO-inconsistent" subsidies on both sides of the Atlantic.

But "this is a case that affects hundreds of thousands of jobs and we're determined to ensure this victory is not a paper victory," Kirk said.

EU Trade Commission Karel De Gucht told Reuters this week the EU would meet the deadline to give United States and the WTO its compliance plan.

He declined to say what steps the EU is taking, but said the "extensive" plan was crafted after consulting with the four European governments - Germany, France, Britain and Spain - targeted by the United States in the case.

Boeing officials said the EU is obligated to show it has already taken steps to comply with the WTO ruling.

"If the Europeans have not done anything to comply, other than to say what they plan to do, that is noncompliance," said Boeing lawyer Robert Novick, a partner at the law firm WilmerHale. "The U.S. could under WTO rules immediately seek authorization to suspend concessions."

Boeing believes the United States should vigorously enforce its rights if Airbus has done nothing to repay past European government subsidies for its A380 aircraft and is receiving new subsidies for other planes such as the A350.

"This provision of launch aid for plane after plane after plane with no indication of calibration on that is unsustainable. It's what the case was about. Enforcing this decision in a meaningful way is important to address that market-distorting behavior," Novick said.

(Additional reporting by Tom Miles in Geneva; Editing by Paul Simao and Jane Merriman)