Friday, April 1, 2011

EU Plans Tactical Appeal in Boeing Case

The European Union plans to appeal as soon as Friday parts of a World Trade Organization ruling that aircraft maker Boeing Co. received billions of dollars in illegal subsidies from U.S. federal and state governments, EU officials said.

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BOEING

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Guests exit a Boeing 787 on display in 2010. The WTO ruled Boeing got billions of dollars in improper aid.

BOEING

BOEING

The EU has called the ruling a victory. Its plan for a quick appeal is aimed at strengthening its position in the case.

On Thursday, the WTO published its final, public ruling on a complaint about Boeing subsidies the EU filed against the U.S. in 2005. In its ruling, the WTO concluded the company received as much as $6 billion in improper government aid from 1989 through 2006. A confidential version of the ruling was released to both sides in February.

The U.S. is also expected to appeal the ruling. It isn't unusual for both sides in a trade dispute to appeal the WTO's findings. That is because they both typically see room in the complex rulings for haggling over details.

What is unusual in the Boeing case is the speed with which the EU plans to act. Its plan to appeal so quickly is partly designed to pressure Boeing to file a hastier, and thus potentially weaker, appeal than it might otherwise have prepared, said people familiar with the EU's thinking.

The skirmish is the latest twist in a seven-year dispute that has become the most complex and expensive proceeding in the WTO's history.

The WTO report "clearly shows that Boeing has received huge subsidies in the past and continues to receive significant subsidies today," said EU trade commissioner Karel De Gucht, in a statement.

U.S. Trade Representative Ron Kirk told a news conference that the WTO had "rejected most of the arguments advanced by the EU" and had "vindicated" longstanding U.S. claims that European aircraft maker Airbus received far more in subsidies than Boeing. In its 2005 complaint, the EU claimed Boeing got more than $23 billion in subsidies.

Mr. Kirk said only $2.7 billion of the amount cited by the WTO must be withdrawn. He said the U.S. still disagrees with this finding and is studying whether to appeal the ruling.

In July, the WTO released a separate public report on a complaint brought in 2004 by the U.S. against EU countries for their support to Airbus parent European Aeronautics Defence & Space Co. In that case, which was later appealed by both sides, a WTO panel found that billions of dollars in preferential government loans that Airbus used to develop six models of passenger jets constituted prohibited export subsidies.

The panel also found that EADS got several billion dollars more in other forms of prohibited financial aid from European governments.

Although both reports are now public, a direct comparison of the alleged subsidies is difficult. In ruling on the U.S. case against Airbus, the WTO didn't provide a precise tally of the subsidies it said EU governments provided.The report released Thursday gives more specific figures on European support for Airbus.

Boeing Chief Executive James McNerney Jr., appearing Thursday at a trade conference in Washington, said he was pleased with the WTO's ruling and said such decisions would help U.S. companies and government officials in pressing emerging economies to abide by international rules.

"We know China's coming, and we are trying to encourage where the bright lines are drawn, and where they are not, if you are going to be a member of [the Organization for Economic Cooperation and Development] or you are going to be a member of the WTO," he said.

Boeing and the U.S. say European governments must withdraw more than $20 billion in aid to Airbus. Airbus and EU officials say the total is far smaller. Both sides say the dispute is likely to continue for months or years.

The new WTO report slammed $2.7 billion in funding Boeing received from the U.S. National Aeronautics and Space Administration and Department of Defense. It also said Boeing could get as much as $4 billion more in coming years in tax breaks from Washington state, where it builds aircraft.

"Boeing can no longer hide they received massive illegal subsidies that have severely harmed Airbus," said Airbus spokeswoman Maggie Bergsma.

—Michael R. Crittenden contributed to this article.

Write to Daniel Michaels at daniel.michaels@wsj.com and Elizabeth Williamson at elizabeth.williamson@wsj.com

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