U.S., EU spar over plane subsidies

Tuesday, June 14, 2005

By BRADLEY S. KLAPPER
THE ASSOCIATED PRESS

GENEVA -- The United States and European Union yesterday both blocked requests from each other asking the World Trade Organization to create panels to investigate illegal subsidies allegedly paid to rival airplane makers Airbus and The Boeing Co., trade officials said.

The moves were largely routine bureaucratic maneuvering -- both sides are expected to make second requests for the panels to be set up, at which point the WTO will have to move ahead with its investigation of U.S. subsidies to Boeing and European aid to Airbus.

The WTO's dispute settlement body will consider the next round of requests after June 23.

Washington filed a complaint at the WTO last month about plans for European government aid to fund development of Airbus' A350 -- a midsize jet to compete with Boeing's 787 Dreamliner.

"Over its 35-year history, Airbus has benefited from massive amounts of EU member state and (EU) subsidies," U.S. Ambassador Linnet Deily told a meeting of the arbitration body yesterday. "Airbus has used these subsidies to seize more than half of the large civil aircraft market at the expense of its U.S. competitors."

The European Union then filed a counter-complaint, claiming that Chicago-based Boeing continues to benefit from massive subsidies in violation of international trade agreements.

"It is in reality U.S. subsidies to Boeing that are distorting the market for large civil aircraft," said EU Ambassador Carlo Trojan. "America's decision will spark probably the biggest, most difficult and costly legal dispute in the WTO's (10-year) history."

U.S. allegations of illegal EU support for France-based Airbus are "purely speculative," according to Trojan.

"The fact that the United States is attacking a non-existent measure is not only ludicrous," he said, "it speaks volumes about the real intentions of the United States -- that is, to intervene in a commercial battle between two companies and to seek to influence the market in favor of Boeing."

But Deily took aim at European claims of U.S. subsidies to Boeing through military contracts and development funding, describing the European request for its own investigative panel as "without merit."

The EU has "provided billions of euros in military R & D funding to Airbus," she said.

The complaints filed last month reactivated the legal process at the WTO that was frozen when the EU and the United States entered negotiations at the beginning of the year.

EU Trade Commissioner Peter Mandelson has said it could take "years to resolve" the standoff but it would likely result in a legal stalemate.

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