- The Washington Times - Tuesday, January 11, 2005

The United States and European Union agreed yesterday to eliminate subsidies paid to aircraft manufacturers Airbus and Boeing.

The breakthrough agreement eases trans-Atlantic tension and would avoid messy litigation at the World Trade Organization, though the two sides still must work out difficult details involving billions of dollars in loans, tax breaks and other government support for the companies.

“For the first time in this long-standing dispute, the U.S. and the EU have agreed that the goal should be to end subsidies,” said U.S. Trade Representative Robert B. Zoellick.

During the negotiations, which are scheduled to conclude within three months, each side would refrain from pursuing WTO litigation and from committing to any new government supports for large commercial aircraft, Mr. Zoellick said.

The stakes in the trade fight are especially high for Boeing, headquartered in Chicago, and Airbus, a European consortium based in Toulouse, France. Boeing has been steadily losing commercial aircraft sales to Airbus, with the European company outselling Boeing for the first time in 2003.

Boeing’s president and chief executive officer, Harry Stonecipher, last year repeatedly called on the Bush administration to confront the European conglomerate over subsidies, saying a 1992 agreement that allowed limited European government support was outdated.

President Bush made a campaign-trail pledge to stand up for the company. The result was U.S. abandonment of the 1992 deal, a U.S. suit and an EU countersuit filed in October at the WTO.

The administration was especially eager to head off a new round of financing for an Airbus model that will compete with Boeing’s latest plane, the 7E7 Dreamliner.

“We’re pleased that the United States and the European Union have taken an important step toward ending subsidies to establish much-needed balance in the commercial aircraft market,” Mr. Stonecipher said yesterday.

The Bush administration said European governments have subsidized Airbus with $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 WTO defines a subsidy as a financial contribution by a government that confers a benefit. By the strict WTO definition, both sides faced possibly embarrassing losses during litigation.

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