EU Says U.S. Gave Boeing Billions In Subsidies

European Union accuses U.S. of paying $23.7 billion in subsidies, giving Boeing unfair advantage over rival Airbus.

GENEVA (AP) –The U.S. federal government and two states are supplying Boeing Co. with ''lavish'' subsidies that will eventually total $23.7 billion, giving the company a massive advantage over rival Airbus, the European Union said Thursday.

The 27-nation EU cited tax breaks, development funding and outright grants to Boeing in its submission to a World Trade Organization investigative panel examining claims that the U.S. is in violation of global commerce rules.

The bloc also accused the U.S. of providing vast amounts of hidden support to Boeing through military contracts.

Washington and Brussels have each accused the other of breaching trade law by subsidizing their respective planemakers. The dispute is expected to be the most complicated and costliest in the Geneva-based trade referee's 12-year-history.

Earlier this week Washington claimed that Airbus took advantage of decades of European subsidies worth the equivalent of more than $100 billion to capture long-standing Boeing customers and become the world's largest seller of planes.

The EU said in a statement Thursday that ''the lavish subsidies benefiting Boeing has allowed Boeing to engage in aggressive pricing of its aircraft, which has caused lost sales, lost market share and price suppression to Airbus in a number of select markets.''

It says the U.S. federal government has made payments to the Chicago-based plane maker including $18.9 billion in research funds through NASA and Department of Defense grants, tax breaks and reimbursement of development costs since 1990.

It also claims the state of Washington will provide $4 billion in tax exemptions and infrastructure projects for the exclusive benefit of Boeing by the year 2024. Kansas, meanwhile, is to provide the company with $900 million in tax breaks and subsidized bonds, said the EU.

Boeing spokesman Charlie Miller said the vast majority of the alleged subsidies are for services rendered to the government. ''These payments represent the value of those services completely consistent with federal guidelines. They are not subsidies,'' he said.

Gretchen Hamel, spokeswoman for the office of the U.S. Trade Representative in Washington, said EU officials' claims were not valid.

''Some of the U.S. and state programs they challenge are not even related to civil aircraft. In other cases the programs are for publicly available research or are available to a broad range of companies _ including Airbus,'' Hamel said in a statement.

According to international trade rules, government support in manufacturing is illegal if another WTO member can prove that the subsidy has harmed one of its companies or industries.

The dispute began three years ago when Washington pulled out of a 1992 agreement with Brussels on plane subsidies.

At Tuesday's first hearing, Washington accused the EU and its member states of providing Airbus with $15 billion in long-term loans at below-market rates. It said the so-called ''launch aid'' saved the Toulouse, France-based company well over $100 billion in borrowing costs compared with commercial lending rates.

Brussels disputes the U.S. calculations and argues that launch aid is legal because it is repaid as Airbus sells aircraft.

The WTO is due to issue its final report on the U.S. case against Airbus on Oct. 31 and the EU case against Boeing in April 2008, but the timetable may slip due to the complexity of the cases.

One of the challenges for the EU will be proving that Boeing support has damaged Airbus, whose sales have soared in the past two decades. Officials in Brussels, in turn, say the U.S. arguments are undermined by Boeing's current spate of good health and bright future.

Airbus sold the most planes last year, but fell behind Boeing on orders for the first time in six years and has suffered from a series of production setbacks and leadership crises.