FACTBOX-Main conclusions of WTO panel on Airbus aid

June 30 (BestGrowthStock) – The following are the main conclusions
of the World Trade Organization panel that ruled in the
complaint brought by the United States against the European
Union over aid for Airbus (EAD.PA: ) civil aircraft.

The report, of more than 1,000 pages, was published on
Wednesday after being issued confidentially to the United States
and EU on March 23. The panel, which was chaired by Uruguay’s
former ambassador to the WTO, Carlos Perez del Castillo, was
formed in 2005.

The United States had complained that the development and
marketing of Airbus airliners was only possible thanks to a
programme of “launch aid” and other financial support by the EU
and some of its member states on non-commercial terms.

It said this aid comprised illegal subsidies, which hurt the
U.S. civil aircraft industry by depriving it of market share.

“LAUNCH AID”

* The panel agreed that support for the Airbus A300, A310,
A320, A330, A340, A380 airliners constituted launch aid.

* It did not agree that support for the A350 was launch aid,
as it did not examine the A350 programme, launched after the
complaint was filed.

* It found that the United States had not proved that there
was a coherent, systematic launch aid programme.

SUBSIDIES

* The panel found that German, British and Spanish funding
for the A380 airliner amounted to de facto export subsidies.

* It disagreed that French aid for the A330, A340 and A380
and Spanish aid for the A340 were export subsidies.

* It did not agree that the export subsidies were based on a
legal requirement to export — i.e. that funding was formally
conditional on achieving exports.

* It disagreed that loans by the European Investment Bank
(EIB) to the Airbus programme amounted to specific subsidies
under WTO rules.
* It found that some but not all infrastructure spending by
member states was a specific subsidy to Airbus.

* It found that the transfer of the German government’s 20
percent stake in Deutsche Airbus to KfW, a state-owned bank, and
then to MBB, subsequently acquired by Daimler (DAIGn.DE: ), was a
specific subsidy. In particular, KfW’s sale of the stake in 1992
to MBB was below market rates.

* It disagreed that debt forgiveness by the German
government was a specific subsidy.

* It agreed that equity infusions by the French government
and Credit Lyonnais were specific subsidies.

* It agreed that the 1998 transfer of the French state’s 46
percent state in Dassault Aviation to Aerospatiale was a
specific subsidy.

* It agreed that some but not all research and development
spending on the Airbus programme was a specific subsidy. (The
panel estimated the total value of R&D spending at about 750
million euros, against a U.S. claim of 2 billion euros and an EU
estimate of 381 million euros.)

MARKET IMPACT

* The panel found that Boeing’s (BA.N: ) share of sales of
large civil aircraft to the EU market declined while Airbus’s
increased over the period under review (2001-2006)
* It found that imports of Boeing to the EU were displaced
by Airbus.

* It found that Airbus displaced Boeing sales in Australia,
China, and India, and to a lesser extent in Brazil, Mexico,
Singapore, South Korea and Taiwan.

* It found that the United States did not prove that Airbus
had undercut prices.

* It agreed the Airbus programme had led to the suppression
or depression of prices for Boeing 737, 767 and 747 airliners
but not the Boeing 777. (Suppression is when prices are
prevented from rising, depression when they are pushed down.)
* It agreed with the United States that launch aid shifted
the risk of launching aircraft to the government from the
manufacturer through non-commercial funding.

* It agreed with the United States that Airbus’s ability to
launch each model was dependent on subsidies.

* It agreed that Airbus could not have marketed planes when
it did without specific subsidies from the EU, Britain France,
Germany and Spain.

* It concluded that if Airbus had launched and marketed the
planes without subsidies it would have been a much different and
weaker company.
* It found that without subsidies Airbus would not have had
the market share it did in 2001-2006.

* It found that without the Airbus subsidies, the United
States would have had a bigger share in EU and third markets.

* It found that Airbus’s market share was a result of
subsidies.

* It disagreed with the United States that the subsidies
allowed Airbus to price more aggressively (i.e. any suppression
or depression of prices was not caused by subsidies).

IMPACT ON U.S. INDUSTRY

* It agreed that the subsidies had displaced Boeing in EU
and third markets, causing “serious prejudice” to the United
States.

* It disagreed that the subsidies led to price undercutting,
suppression or depression.

* It found that Boeing recovered in 2005-2006 after
performing poorly in 2001-2003 so there was no material injury
to U.S. domestic industry.
* It found that the EU had nullified and impaired benefits
to the United States that it was entitled to under WTO
agreements.

RECOMMENDATIONS

* The panel recommended that prohibited export subsidies be
withdrawn “without delay” and said this meant within 90 days of
adoption of its report by the WTO.

* It said the EU should remove the adverse effects of
subsidies or withdraw subsidies causing adverse effects.

* It made no recommendations on how the EU should do this
(and the United States. did not ask for recommendations)
(For more on Airbus dispute click on [ID:nLDE65O1RU] )

Stock Market News

(Compiled by Jonathan Lynn; Editing by Stephanie Nebehay)

FACTBOX-Main conclusions of WTO panel on Airbus aid