EU, US Face Off at WTO in Aircraft Spat
(Source: Deutsche Welle German radio; issued May 31, 2005)
The months-long escalating fight over subsidies to aircraft giants Boeing and Airbus came to a head this week after the US and the EU filed suit against each other with the World Trade Organization.

The EU is resuming action at the WTO against the United States in a dispute over subsides to Airbus and Boeing, EU trade chief Peter Mandelson said Tuesday, adding he was "confident" of the bloc's case. "We in Europe were still seeking to negotiate an agreed solution, while the US was planning last week to take this issue to the WTO," he told Reuters. "This decision is highly regrettable for those that think the WTO has better things to do with its time than referee a grudge fight."

The move pits Washington and Brussels squarely against each other in a months-long dispute that escalated after an April 11 deadline passed without a resolution. On Monday, the US filed suit against Airbus and now, the European countermove, raises the stakes in the transatlantic dispute over state aid for aircraft giants Boeing and Airbus.

The WTO's 148 members can face huge penalties if they are found to have breached the rules of global commerce and then fail to fall into line with its decisions.

The WTO said it received Washington's complaint on Tuesday and that an initial hearing was scheduled for June 13 to set up a dispute settlement panel. The panel could take until 2006 to rule on the dispute, and with possible appeals by either side, a final decision may come even later.


EU disappointed with US move

After a visit to the WTO's Geneva headquarters on Tuesday, EU Trade Commissioner Peter Mandelson said he was disappointed by the US move against Airbus, which has overtaken Boeing to lead the global civilian aircraft market.

"Airbus's success is well earned," Mandelson told AFP. "It's won through hard work, high technology and huge creativity, not by subsidies as Boeing would like to pretend. This decision is highly regrettable from the standpoint of all those who believe that the WTO has better things to do with its time than referee this grudge fight of Boeing against Airbus."

The EU and US first filed requests for consultations at the WTO in October -- the formal opening shot in the WTO's dispute procedures -- but later agreed to freeze the process as they tried to reach a settlement.

Washington's WTO complaint was announced shortly after Mandelson had made a fresh proposal to resolve the dispute by trimming state aid to both companies.


EU promised subsidies reduction

On Tuesday, Mandelson hinted that he believed the US had acted in bad faith. "I think it is as well for the world to know that we in Europe were still seeking to negotiate an agreed solution while the United States was planning to take this matter to the WTO," he said.


On Monday, US Trade Representative Rob Portman said in a statement, however, that Washington was unhappy because the EU had "only proposed to reduce subsidies, not end them," thereby not tackling US concerns head on and forcing Washington's hand.

"We still believe that a bilateral negotiated solution is possible," he said. "But the negotiations won't succeed unless the EU recommits to ending subsidies."

Washington had decided to take the case to the WTO because that was the best way to prevent the aircraft dispute from spilling over into other tussles on steel duties and biotechnology, Portman's office said.

On Monday, after Washington's announcement, Mandelson and Portman had issued a joint statement. "We remain united in our determination that this dispute shall not affect our cooperation on wider bilateral and multilateral trade issues," they said. "We have worked together well so far, and intend to continue to do so."

The dispute over aid to Airbus and Boeing was inflamed lately when Airbus requested British government aid for its A350 long-haul plane designed to compete with Boeing's plans to launch the 787 Dreamliner.

The United States believes financial aid given to Airbus to launch new aircraft is illegal under WTO rules, while the Europeans accuse Washington of subsidizing Boeing through military contracts. (ends)

EU Hits Back at US in Aircraft Aid Row
(Source: Voice of America news; issued May31, 2005)
WASHINGTON --- The United States and the European Union appear to be heading toward the biggest trade fight in history, with competing cases at the World Trade Organization over accusations of government subsidies to both sides' major aircraft manufacturers. It will probably take the WTO about 18 months to issue a final verdict on the matter.

The United States was the first to move, asking the WTO to set up a panel of trade judges to investigate whether the E.U. has given Airbus, the European aerospace company, billions of dollars in illegal aid.

Hours later, the E.U. retaliated, saying it would file its own counter-complaint against the U.S. aircraft maker Boeing, which it accuses of receiving unfair government subsidies.

The move and counter-move follow the breakdown Monday of off-and-on U.S.-E.U. talks aimed at achieving a negotiated settlement that would end subsidies to the planemakers. An E.U. offer to cut European government loans to Airbus for its proposed A-350 passenger jet by 30 percent, in exchange for similar cuts in aid to Boeing, was rejected by U.S. officials as not being enough. Washington says that was a step back from an earlier E.U. offer to eliminate all subsidies.

E.U. Trade Commissioner Peter Mandelson says the U.S. decision to take the matter to the WTO is "highly regrettable". He added, "I am disappointed that the U.S. has chosen this confrontation with Europe. America's decision will, I fear, spark probably the biggest, most difficult and costly legal dispute in the WTO's history. It will be hard-fought on both sides, and I can assure you Europe's interests will be fully defended."

U.S. Trade Representative Rob Portman said in a statement late Monday that preparations being made by E.U. governments to commit more than $1 billion to Airbus for the development of the A-350 broke the spirit of an agreement to suspend all subsidies while the two sides were engaged in bilateral talks on the issue.

The A-350 would compete directly with Boeing's new 787 jet in the market for long-distance, midsize passenger and cargo aircraft.

For his part, Mr. Mandelson accuses Boeing of receiving tax breaks from the government of Washington state, where its main factory is located, as well as U.S. federal government contracts for military and space research and Japanese government support. All that aid, he says, is worth billions of dollars.

Europe's top trade official says that, ironically, the U.S. decision to take the case against Airbus to the WTO means E.U. governments can now feed the aircraft manufacturer the money it needs to launch the new model.

Even though the trade war promises to exacerbate tensions between Washington and Brussels, the two sides say they will not let their spat over aviation subsidies affect other trade issues, such as their negotiations with developing countries on a free trade blueprint that are supposed to culminate in December. (ends)
US Seeks Arbitration Over Airbus Subsidies
(Source: Deutsche Welle German radio; issued May 31, 2005)
The US will ask the World Trade Organization Tuesday to create an arbitration panel to resolve a dispute over European subsidies to aircraft maker Airbus, the US Trade Representative said in a statement.

"The United States announced Monday that it will file a request for the establishment of a World Trade Organization (WTO) dispute settlement panel to resolve the dispute. The panel request will be filed on Tuesday, May 31," the USTR statement said.

The US complaint was announced here as a spokeswoman for European Union trade chief Peter Mandelson (photo) said Monday that Mandelson had written to his US counterparts with a fresh proposal to resolve the transatlantic row over subsidies for airplane makers Airbus and Boeing.

Illegal aid

The simmering dispute over aid to Airbus and Boeing has become inflamed lately after Airbus requested British government aid for its A350 long-haul plane designed to compete with Boeing's plans to launch the 787 Dreamliner.

The United States believes financial aid given to Airbus to launch new aircraft is illegal, while the Europeans accuse Washington of subsidizing Boeing through military contracts.

"For almost a year, the United States has tried to convince the EU to negotiate an end to subsidies for large civil aircraft," US Trade Representative Rob Portman said in the statement. "So we were pleased when, on Jan. 11 of this year, the EU agreed to a standstill on launch aid while we negotiated an end to subsidies. Unfortunately, at this point, the EU is no longer willing to hold off on launch aid, and has only proposed to reduce subsidies, not end them."

A balanced approach

Meanwhile, in Brussels, Mandelson's spokeswoman Claude Veron-Reville said earlier Monday that the EU trade chief's proposal renews a call for a balanced approach to the dispute.

"Peter Mandelson is making it clear what we are ready to do and this is why he has made a fresh proposal," she said. "He has repeated our proposal and that we are willing to negotiate rather than go the WTO."

The USTR said that by requesting the arbitration panel, Washington is providing time for the EU to reconsider its plans to provide new subsidies and recommit to the deal struck in January.

"This would include an immediate halt to any further steps toward providing new launch aid and a recommitment that the purpose of the negotiations is to end new subsidies for Large Civil Aircraft (LCA), and not merely to reduce them," the USTR said.

"We still believe that a bilateral negotiated solution is possible," Portman said, noting that out of the 100 concluded WTO cases involving the US since the WTO was founded, over a third were satisfactorily resolved following negotiation. "But the negotiations won't succeed unless the EU recommits to ending subsidies."

Months of negotiation

The EU and the US have been trying for months to negotiate an agreement to end their dispute over commercial aviation, to avoid taking the case down the perilous WTO route.

Washington insists that over its 35-year history, Airbus has benefited from massive amounts of member state and EU subsidies that have enabled the company to create a full product line of aircraft and gain a 50-percent share of large civilian aircraft sales and a 60 percent share of the global order book.

Every major Airbus aircraft model, they argue, was financed, in whole or in part, with EU government subsidies taking the form of "launch aid" - financing with no or low rates of interest, and repayment tied to sales of the aircraft.

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