- The Washington Times - Thursday, September 16, 2004

The Bush administration yesterday demanded that European governments end subsidy payments to Airbus, a consortium that has eclipsed Chicago-based Boeing as the world’s top commercial aircraft manufacturer.

President Bush during a campaign stop in Washington state, home to Boeing’s airplane manufacturing operations, this summer said the 25-nation European Union must scrap Airbus subsidies or face a case at the World Trade Organization.

U.S. trade officials yesterday in Brussels met with European counterparts to review a 1992 agreement that allows European governments to offer low-cost, low-risk loans for new Airbus projects.

“Obviously, the two options here are either to renegotiate [the 1992 agreement] or bring a WTO case,” John Veroneau, general counsel for the U.S. Trade Representative’s Office, said yesterday from Brussels.

Mr. Veroneau led the U.S. delegation in yesterday’s meeting with Europe, the second time the two sides have met formally to discuss the 1992 pact. He said the five-hour meeting with European officials was “useful and frank” but not constructive.

Europe has rejected calls for an end to subsidies without concessions by the United States and Boeing.

“We do not reject the idea of renegotiating the 1992 agreement, provided this results in an improvement in the current system and that the sum of support on both sides is equivalent,” said Anthony Gooch, EU spokesman in Washington.

Boeing this year stepped up rhetoric against Airbus, enlisting political allies in the Senate and election-year focus on trade and job issues to help generate support for a confrontation with Europe.

Mr. Bush took up the cause and in August told Boeing workers “it’s unfair to this American company that these European governments continue to subsidize Airbus.”

The 1992 agreement allows European governments to fund one-third of the cost of new aircraft programs. So far, that totals about $18 billion.

At the same time, Airbus’ share of the world market has grown from about 10 percent in 1992 to more than 50 percent.

Boeing blames declining market share for some job losses — Boeing Commercial Airplanes has reduced employment from 115,880 to 54,880 workers in the past five years.

“Airbus is a mature, profitable company. It no longer needs launch aid to compete. It is time for launch aid to end,” Boeing Chief Executive Officer Harry Stonecipher wrote in an opinion piece published Wednesday by the Financial Times, a London newspaper.

Europe contends that Boeing also benefits from government handouts, citing $18 billion in defense and government contracts, research spending, and local tax breaks. EU officials also fault Boeing for falling short on research and development and capital investment.

The White House said defense contracts are not subsidies.

According to a WTO agreement, approved after the 1992 pact, subsidies include government financial contributions, including fund transfers such as loans and loan guarantees, as well as tax credits and price supports.

Europe could respond to a WTO case against Airbus subsidies with a suit of its own against government programs that benefit Boeing.

Mr. Veroneau did not lay out a timetable to end talks and file a WTO case.

Airbus, headquartered in Toulouse, France, is jointly owned by European Aeronautic Defense and Space Company, a German-French-Spanish venture, and Britain’s BAE Systems.

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