- The Washington Times - Tuesday, May 31, 2005

The European Union yesterday moved ahead with a World Trade Organization case against U.S. aid to Boeing Corp., a tit-for-tat escalation of a trans-Atlantic trade fight.

The Bush administration Monday asked the WTO to convene a panel of judges in a case against EU government loans to European aircraft manufacturer Airbus. The request signals a move toward litigation and away from negotiation.

“I regret the action taken by the United States in bringing this dispute between the two companies to the WTO, thereby turning their back on negotiation,” Peter Mandelson, the trade commissioner for the 25-nation bloc, said yesterday in announcing resumption of the EU case.

Airbus, based in Toulouse, France, and Boeing, with headquarters in Chicago, compete to stock the world’s airline fleets. Airbus, established in 1970, overtook Boeing in global sales in 2003.

The two WTO cases deal with the role of governments as they support civilian passenger aircraft industries.

The United States says low-cost, no-risk loans, known as launch aid, that European governments give Airbus violate trade rules. Europe objects to funds that the United States and other governments grant Boeing through tax breaks, research support and other aid.

If the two sides can’t agree, a panel of WTO judges will rule on the legality of the European and American aid. A guilty finding would force a government to change its policies or face retaliatory tariffs and a potential trade war.

The Bush administration contended that EU launch aid for Airbus’ A380 aircraft, scheduled to enter service in 2006, totaled about $6.5 billion. Airbus has asked European governments for $1.7 billion to support a newer aircraft, the A350, that would enter service in 2010.

The administration wants to head off any new aid.

Europe, meanwhile, contends that Boeing has received about $30 billion in subsidies since 1992, with several billion alone for the 787, a new model set to join commercial fleets in 2008.

“I am confident that launch investment for Airbus is compatible with WTO rules. I also believe that the United States is vulnerable on what Boeing receives,” Mr. Mandelson said.

The sides had allowed some aid under a 1992 agreement, but first Boeing and then the Bush administration last year said the deal had outlived its usefulness. The United States scrapped the deal and filed a WTO case in October; Europe immediately countered.

The sides held off on taking the case before judges and in January formally agreed to negotiate a solution that would eliminate 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,” Rob Portman, the U.S. trade representative, said Monday as the U.S. restarted the case by requesting the WTO convene a panel of judges.

But a U.S. trade official yesterday said the United States remains ready to talk and would prefer a negotiated solution to the WTO proceedings.

“I think the two governments are trying to be careful to try to rein this in and not turn it into a larger strategic debate about industrial policy. Both sides have a lot to lose,” said Spencer Griffith, a trade policy expert at the D.C. law firm Akin Gump Strauss Hauer & Feld.

WTO cases take about one-to-two years before a final decision is reached; the sides can settle in the meantime.

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