WTO Battle Royale: Airbus Verdict Out Soon

Trade dispute watchers, we are about to witness the Big One. The news wires are abuzz that the verdict to Boeing (US) taking Airbus (EU) to the WTO dispute settlement mechanism over subsidies will be announced very, very soon. India's Business Standard predicts an ominous outcome for the Europeans:

... the US would secure a verdict on its complaint whether the European aircraft consortium Airbus is a beneficiary of illegal subsidies running into billions of dollars. Indications are that Washington might receive a mixed but positive result on its major challenge against the so-called “launch aid” of about $15 billion, as provided by the European governments to Airbus. Billed as the biggest dispute in the history of the GATT/WTO, the ruling could cast Airbus in bad light...

Not that it's stopping the British, French, and Germans from...how do I say this in a non-biased manner...supporting Airbus. These countries are adamant that, regardless of the WTO case's outcome, they will continue to provide the consortium aerospace concern with loans for the development of the A350:

The European Union signaled governments will proceed with subsidies for the Airbus SAS A350 even if a pending World Trade Organization decision finds previous aid to the biggest planemaker was illegal. “Independently of new developments in the current case before the WTO, it has always been our position that any support for the A350 has no relation to the current WTO litigation,” Lutz Guellner, a spokesman for the European Commission, the 27-nation EU’s executive arm in Brussels, said today in a statement. The A350 will challenge Boeing Co.’s 787 and 777.

The EU stance threatens to escalate a five-year fight sparked by Chicago-based Boeing, the second-largest planemaker, and intended to derail government loans for the new Airbus model. France, Germany and the U.K. have pledged loans worth 3.3 billion euros ($4.7 billion) for the A350.

A WTO panel is set to issue a preliminary ruling Sept. 4, addressing whether Europe violated WTO rules when the three European nations provided launch aid for previous Airbus models. Airbus benefited from risk-free grants worth $23 billion over the past four decades, the 2004 U.S. complaint alleged.

“The commitment of launch aid, or any other form of preferential financing, by any of the EU member states would be a major step in the wrong direction,” Nefeterius McPherson, a spokeswoman for the U.S. Trade Representative, said in an e- mail. “We want to resolve the problem of WTO-inconsistent aircraft subsidies, but the commitment of additional support would make that even harder to do.”

The USTR obviously disagrees, stating that the US will hit back hard if the EU continues with its (wicked?) ways:

U.S. Trade Representative Ron Kirk said June 25 that his office would “respond quickly and swiftly” with a WTO complaint against the EU if Airbus were given new government aid for the A350.

Several weeks before the U.S. filed its original complaint, then-Boeing Chief Executive Officer Harry Stonecipher said he wanted to block European countries from providing further loans. “I don’t want to wake up next Wednesday and find that Airbus is doing a new plane” with government help, he said on Sept. 2, 2004. The U.S. filed its complaint on Oct. 6, 2004.

Robert Novick, a partner at Wilmer Cutler Pickering Hale & Dorr LLP who represents Boeing in the WTO case, has said a decision backing the U.S. would mean Airbus isn’t entitled to launch aid for the A350. Boeing referred questions today to the U.S. Trade Representative.

Oy, what's "cease and desist" in German? The general level of hostility among the combatants is running pretty high here. Remember that the EU has also initiated a case against Boeing on behalf of Airbus over US government supports. From Boeing's hometown paper, the Chicago Tribune:

A separate panel of the WTO is mulling a counterclaim by the European Union that Boeing's development of aircraft such as the 787 Dreamliner was aided by $12.8 billion in research it conducted for NASA and the U.S. Department of Defense. Boeing claims it received about one-tenth of that total. The Europeans calculate the total value of state and federal aid to Boeing through 2024 to be $23.7 billion, an amount that includes tax breaks and its $24.3 million package to relocate its headquarters to Chicago.

As I've said before--enormous sums aside--both sides may take points off each other but in the end it will be a wash. Aside from enriching a lot of trade lawyers, will it have been worth it for both sides?

4/4 UPDATE: The WTO ruling has been confidentially relayed to the partisans; we should hear more soon. In the meantime, do read the FT's timeline of the Boeing-Airbus saga.