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WTO to Rule on Boeing/Airbus Dispute

September 4, 2009 By: Jena Tesse Fox

The World Trade Organization is set to rule today on what is being called the biggest trade dispute in history—between aerospace giants Boeing and Airbus. The U.S. planemaker is accusing the EU of handing out illegal subsidies to its archrival, and it is believed that the WTO is expected to agree.

The decision would force a change in the way the world’s biggest plane manufacturers fund their development. However, the EU has also issued a counterclaim against the U.S. for its support of Boeing, and a ruling on that is due in the next six to eight months.

The WTO’s judgment will come today with a final decision expected three to four months later. It follows five years of deliberations. The panel will release its findings to Airbus and Boeing, but the results will not be made public.

Experts say the WTO’s decision will set the boundaries for acceptable government funding in civil aviation. They also believe that despite today outcome, there remains a long way to go in the saga. “This whole WTO process is going to last four to five years. It’s going to be 2013 at least before we get a final settlement on this,” said Howard Wheeldon, senior strategist at BGC Partners.

Trade rules do not allow subsidies for exports, or subsidies that distort the market. Boeing does not receive launch aid from the U.S. government, but European member states have argued that the company gets state funding through research and development money.

Last month, Lord Mandelson announced the UK would lend Airbus $556 million to develop its new wide-body plane, the A350 XWB. The government has made a return of $2.6 billion on its previous $1.9 billion investment in Airbus, according to the Department for Business, Innovation & Skills, headed by Mandelson.

At the time, a spokesman for the U.S. Trade Representative called the UK loan “a major step in the wrong direction.”

France and Germany have also offered $2 billion and $1.6 billion respectively in launch aid for the A350.

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