Brussels hits at Airbus subsidy claim
Saturday, 28 July 2007
Frances Williams in Geneva
A US claim that Airbus, the European aircraft maker, received government assistance worth more than $200bn was dismissed on Tuesday by European Union trade officials as "ridiculous and absurd".
Brussels said the US made the claim in a confidential written submission to the World Trade Organisation dispute panel which is examining Washington's charge that launch aid and benefits provided to Airbus by European governments constitute illegal subsidies.
"The US is now seeking to argue that the benefit of [launch aid] alone amounts to as much as $205bn," the EU said in a statement, noting the claimed assistance was more than eight times the $25.8bn (€18.7bn, £12.5bn) capitalisation of EADS, Airbus's parent company.
The EU attack came ahead of a second round of hearings in the US case against Airbus on Wednesday and Thursday in Geneva. In the first round, in March, the US argued the benefit of launch aid over the life of Airbus was "well over $100bn".
A separate WTO panel is investigating the EU's counterclaim that Boeing, Airbus' US rival, has received billions of dollars in hidden subsidies through government research and development contracts, tax breaks and other benefits.
The first round of hearings in that case is scheduled for late September.
The Airbus-Boeing dispute, brought to the WTO in 2004, is the biggest ever handled by the world trade arbiter, potentially giving rise to billions of dollars worth of trade sanctions against one or both trade powers.
But the long legal proceedings are likely to take another two years to complete. A panel judgment in the US case against Airbus is due by the end of this year but the verdict in the EU case against Boeing will not come before next summer. Further delays and almost inevitable appeals are likely to push a definitive conclusion well into 2009.
Both the US and EU say they would prefer a negotiated settlement, but talks appear to have lapsed.
The EU said on Tuesday that the US had "magically" arrived at its estimate of $205bn in aid by compounding interest on subsidies dating back as far as the inception of Airbus in 1967.
"This method of calculation is contrary to accepted wisdom, practices and the WTO subsidies agreement," it added, arguing that the same methodology would value subsidies to Boeing at $305bn rather than the $23bn alleged by Brussels.
The EU says the launch aid given for new Airbus aircraft was allowed under a 1992 bilateral civil aircraft agreement that the US unilaterally cancelled in 2004.
It says the loans were made on terms sometimes more onerous than those commercially available, since governments benefit from continuing royalty payments on aircraft sales even after full repayment of the loan and interest.
A US claim that Airbus, the European aircraft maker, received government assistance worth more than $200bn was dismissed on Tuesday by European Union trade officials as "ridiculous and absurd".
Brussels said the US made the claim in a confidential written submission to the World Trade Organisation dispute panel which is examining Washington's charge that launch aid and benefits provided to Airbus by European governments constitute illegal subsidies.
"The US is now seeking to argue that the benefit of [launch aid] alone amounts to as much as $205bn," the EU said in a statement, noting the claimed assistance was more than eight times the $25.8bn (€18.7bn, £12.5bn) capitalisation of EADS, Airbus's parent company.
The EU attack came ahead of a second round of hearings in the US case against Airbus on Wednesday and Thursday in Geneva. In the first round, in March, the US argued the benefit of launch aid over the life of Airbus was "well over $100bn".
A separate WTO panel is investigating the EU's counterclaim that Boeing, Airbus' US rival, has received billions of dollars in hidden subsidies through government research and development contracts, tax breaks and other benefits.
The first round of hearings in that case is scheduled for late September.
The Airbus-Boeing dispute, brought to the WTO in 2004, is the biggest ever handled by the world trade arbiter, potentially giving rise to billions of dollars worth of trade sanctions against one or both trade powers.
But the long legal proceedings are likely to take another two years to complete. A panel judgment in the US case against Airbus is due by the end of this year but the verdict in the EU case against Boeing will not come before next summer. Further delays and almost inevitable appeals are likely to push a definitive conclusion well into 2009.
Both the US and EU say they would prefer a negotiated settlement, but talks appear to have lapsed.
The EU said on Tuesday that the US had "magically" arrived at its estimate of $205bn in aid by compounding interest on subsidies dating back as far as the inception of Airbus in 1967.
"This method of calculation is contrary to accepted wisdom, practices and the WTO subsidies agreement," it added, arguing that the same methodology would value subsidies to Boeing at $305bn rather than the $23bn alleged by Brussels.
The EU says the launch aid given for new Airbus aircraft was allowed under a 1992 bilateral civil aircraft agreement that the US unilaterally cancelled in 2004.
It says the loans were made on terms sometimes more onerous than those commercially available, since governments benefit from continuing royalty payments on aircraft sales even after full repayment of the loan and interest.