Airbus, Boeing brace for crucial phase in subsidies dispute

After a year-long lull, the world's biggest trade dispute will enter a crucial phase in coming months, potentially casting a shadow over faltering efforts by the European Union and United States to negotiate a wider free-trade deal.

At stake are mutual claims of unfair subsidies to the two planemakers that raise the prospect of $22 billion a year in threatened trade sanctions, though many say a resolution remains years away and could ultimately involve a negotiated settlement.

The dispute, said to be the biggest in terms of value and time, dates back to 2004 when the U.S. urged the World Trade Organization (WTO) to act against European government loans to help Airbus develop jets such as the A380, followed by a counter-claim from the EU over federal and local aid for Boeing.

In separate rulings, the WTO found that both planemakers had benefited from billions of dollars of unfair subsidies.

The case is now bogged down in arguments over whether each side complied with orders to withdraw illegal subsidies and undo the effects of the majority of aid which, although not banned, can be challenged if it can be proved to be damaging.

After a three-year delay due to the strain placed on its resources by the marathon dispute, the WTO is expected to rule within weeks on whether the EU obeyed its rulings, followed by a similar report on U.S. compliance early next year.

Both sides claim the other ignored the thousands of pages of judgments and appeal findings in each case and have sought WTO permission to draw up sanctions, with the U.S. calling for up to $10 billion in counter-measures and the EU $12 billion.

U.S. sources have said they are confident the WTO will find the EU flouted its decisions, while the European side has called U.S. accusations "empty".

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