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EU files tactical appeal in Boeing trade spat


A plane lands in front of Frankfurt's skyline April 21, 2010.REUTERS/Johannes Eisele
A plane lands in front of Frankfurt's skyline April 21, 2010.REUTERS/Johannes Eisele

By Tim Hepher and Juliane von Reppert-Bismarck

GENEVA/BRUSSELS (Reuters) - The European Union filed an appeal against an aircraft subsidies ruling on Friday just hours after calling it a victory, a tactical move in a transatlantic game of global trade chess.

Europe's appeal came after the World Trade Organization ruled Boeing had received at least $5.3 billion in subsidies that were against the WTO rules, hailed as a "crystal-clear" win by the European Commission.

Washington has also claimed victory in the verdict by comparing it to recent WTO condemnation of what the United States says are even larger European subsidies to Airbus.

Together the cases represent the world's largest trade dispute.

The case against EU aid to Airbus -- lodged by the United States -- is several months ahead of the case against U.S. aid to Boeing, raising European fears that Airbus could eventually have to stop receiving disputed aid months before its U.S. rival. The EU's appeal was made quickly in order to close that gap.

Both sides have 30 days to appeal, but once one side appeals, the other must decide whether to respond in five days.

"The EU's victory in this case against Boeing remains very clear for all to see. However, the EU has chosen to quickly appeal technical elements of the ruling for legal strategic reasons -- including to reduce what has been a growing time gap between the two parallel aircraft disputes," said John Clancy, EU trade spokesman.

A spokeswoman for the U.S. Trade Representative Ron Kirk accused the EU of dragging out the dispute instead of moving to comply with a separate WTO ruling that found Airbus had received some $20 billion in subsidies.

"We believe the panel's findings challenged by the EU are correct and that the Appellate Body will affirm them. The Europeans haven't gotten the message. Instead of prolonging the dispute at the WTO, they should be figuring out how to comply with the findings against them," spokeswoman Nefeterius McPherson said.

The United States says Thursday's decision found only $2.7 billion in subsidies for Boeing that it still has to remove because it has already eliminated some of its support.

To see what happens next over the $2 trillion plane market and 100,000 affected jobs, all eyes are on a wooden letterbox.

A modern trade war is waged with a combination of electronic communications, light footwork and almost balletic stagecraft on the shores of Lake Geneva, home to the 153-nation WTO.

To start the clock on possible sanctions or appeals, delegates step across a path from the WTO's marbled headquarters lined with murals and slip a note into an A4-sized pigeon-hole.

DIPLOMATIC DANCE

Like most diplomatic dance steps in a city hosting more than 20 international organizations, even the most apparently trivial move, like the timing of Friday's EU appeal, is quickly scanned for anything political.

By narrowing the nine-month gap between the two competing cases, the EU may reduce the vulnerable period during which the nerve of member states could wobble once the WTO gives its verdict on appeals in the case against Airbus next month.

Washington has already said Airbus must rapidly repay or restructure disputed European loans after that verdict.

In the case the EU is appealing on Friday, the United States could now respond with its own early appeal, or try to slow proceedings down by calling for a WTO hearing to discuss technical matters such as how to handle confidential data.

The dispute over aircraft subsidies is the largest case ever handled by the WTO, set up in 1995 to police global trade.

Rulings on the case run to 2,000 pages. If allowed to run their course, the mutual subsidy complaints could trigger sanctions and a possible trade war, but most analysts say that point is years off and may be prevented through negotiation.

"The reality is that ... settlement of this dispute could yet be years off," said aviation expert Howard Wheeldon, senior strategist at BGC Partners in London.

The case has kept dozens of lawyers, diplomats, lobbyists and trade delegates active for six years, not only from the United States and Europe but other countries indirectly affected like Australia, China, Brazil, Canada, Japan and South Korea.

One source involved in the case estimated the total cost of the proceedings so far at tens of millions of dollars, reaching possibly $60 million for one side alone -- more than 1 percent of the subsidies identified in the most recent finding.

(Additional reporting by Robin Bleeker, Doug Palmer in Washington; editing by Andrew Callus and Mohammad Zargham)

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