- The Washington Times - Wednesday, October 6, 2004

The United States and European Union slapped each other with World Trade Organization suits yesterday, accusing one another of paying out billions of dollars in illegal subsidies to their top aircraft manufacturers.

The cases escalate U.S.-EU trade friction and step up the high-stakes battle between Boeing, headquartered in Chicago, and Airbus, based in Toulouse, France, to control a wider share of the world market for commercial airplanes.

The trans-Atlantic rivals fought a similar battle over subsidies in the late 1980s and early 1990s before a 1992 agreement allowed a set level of government support. The Bush administration yesterday said the agreement had outlived its usefulness, as Airbus now sells more planes than Boeing.

“Since its creation 35 years ago, some Europeans have justified subsidies to Airbus as necessary to support an ‘infant’ industry. If that rationalization were ever valid, its time has long passed,” U.S. Trade Representative Robert B. Zoellick said.

Europe said the United States also doles out illegal aid.

“If this is the path the U.S. has chosen, we accept the challenge, not least because it is high time to put an end to massive illegal U.S. subsidies to Boeing which damage Airbus,” said Pascal Lamy, trade commissioner for the 25-nation bloc.

Democrats said the administration filed the case only weeks before the November election in a cynical attempt to curry support for the president.

“Election-year conversions are not an adequate response to American businesses and workers harmed by inaction in the face of unfair trading practices,” said Rep. Sander M. Levin, Michigan Democrat and a party leader on trade issues.

The United States and Europe trade more than $400 billion in goods and services annually, the biggest such partnership in the world, but relations have been marred by a series of disputes over U.S. steel tariffs, export subsidies, EU regulations on genetically modified crops and European customs rules.

Congress is working to repeal the export subsidies and eliminate one fight, but yesterday’s actions may complicate a settlement.

The Airbus-Boeing battle follows calls from Boeing President and Chief Executive Officer Harry Stonecipher to confront the European conglomerate.

Airbus last year passed Boeing in annual aircraft deliveries while in the past five years, Boeing Commercial Airplanes has cut 61,000 jobs, more than half its work force, Boeing said.

The Bush administration this summer sat down with EU officials to ask for a renegotiation of the 1992 agreement but a senior U.S. trade official said Europe responded with “stonewalling and stalling.”

Mr. Lamy said the administration was “never seriously interested” in renegotiating the pact.

The Bush administration said European governments have subsidized Airbus, a consortium of French, German, Spanish and British companies, to the tune of $15 billion in low-cost, no-risk loans for new projects.

Europe’s case responded with a claim of $23 billion in subsidies for Boeing since 1992, including local tax breaks, infrastructure support, defense contracts and NASA research.

The stakes are especially high as the companies engineer new, competing aircraft. Airbus has developed the massive, 555-passenger A380 and has reportedly begun developing a smaller aircraft, the A350, to go head-to-head with Boeing’s new 7E7 “Dreamliner,” built for up to 257 passengers.

The WTO case was in part to head off another round of support for the new aircraft model, the administration said.

Yesterday’s WTOfilings will prompt consultations, hearings and appeals that could drag on for as long as two years.

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