From: Reuters
Published January 16, 2008 08:14 AM

Settlement hopes dim in Boeing-Airbus trade clash

By Laura MacInnis

GENEVA (Reuters) - Prospects of a speedy settlement in the tit-for-tat transatlantic clash over aircraft subsidies appeared dim on Wednesday as a case involving Boeing Co <BA.N> resumed at the World Trade Organization (WTO).

The European Union and United States are pursuing competing complaints with the WTO over tens of billions of euros and dollars in state support provided to Boeing and Airbus <EAD.PA>, rivals who both posted record results in 2007.

While both sides could be found in violation of international trade rules if the WTO cases unfold to the verdict stage, industry and government sources said no meaningful negotiations were underway to resolve them.

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As the WTO panel gathered to hear a second set of arguments in the European complaint against Boeing, Rainer Ohler, Airbus' senior vice-president for public affairs and communications, accused the U.S. group of having imposed "unrealistic" preconditions to talks.

"We have suggested from the beginning that a balanced, negotiated settlement would be the best solution for all sides as, in a case of this complexity and scope, any delay in inevitable discussions benefits only the lawyers," Ohler said.

Airbus Chief Executive Tom Enders, speaking to reporters at the company's Toulouse headquarters, said it was important for Boeing and Airbus "to have something like a level playing field" in their financing options.

"The solution to this quarrel will only come through a negotiated solution," Enders said.

Boeing, in turn, said its European Commission (EC) counterparts had offered no momentum towards negotiation.

"Thus far we have seen no evidence of an EC interest to resolve this dispute," Boeing lawyer Robert Novick said.

STRONG YEAR

The U.S. and European aircraft giants battle for a market worth about $80 billion a year. Both had a strong 2007 and Airbus said on Wednesday it won 1,341 orders for aircraft last year, just behind Boeing with 1,413 orders.

Boeing has suffered less from a weakened U.S. dollar than Airbus, though the companies could be vulnerable to any downturn in the global economy.

They also face longer-term threats from emerging competitors in China, Russia, Canada and Brazil, which are watching the WTO for signs of what financing mechanisms will be allowable in future under international trade rules.

It was unclear when the twin WTO dispute panels would release their initial rulings.

The panel in the case against Airbus, in which the United States alleges the company got grants and loans at unfairly favorable rates in the form of "launch aid," is expected to release a descriptive section of its report to parties in May.

The two sides would then have a week to comment on the evidence included, before the panelists draw up their analysis and conclusions in an interim report which could take weeks or months.

In the case against Boeing, which hinges on the provision of research and development assistance from NASA and the U.S. Department of Defense, the WTO panel is likely to meet again for at least one round of questions before proceeding to the report-writing stage later this year.

A ruling issued in the Airbus case before the Boeing conclusions are finished could put the European Union at a disadvantage in any negotiations that do occur.

An EU official said it was possible the two reports would be issued together. "It may make sense to deal with these issues more or less at the same time," the official said.

(Additional reporting by James Regan in Toulouse; Editing by Jonathan Lynn and David Holmes)

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