US to bring trade case over EU Airbus subsidy

The Bush administration said today it would bring a trade case alleging the European Unionis providing illegal subsidies to Airbus, the major competitor to US-based Boeing Co.

US Trade Representative Rob Portman said the administration had decided to proceed with a case before the World Trade Organisation in light of preparations by member states of the European Union to commit $1.7bn in new launch aid to Airbus.

“The EU’s insistence on moving forward with new launch aid is forcing our hand,” Portman said in a statement announcing the administration’s decision.

Both sides argue that the other is providing WTO-illegal subsidies to support a domestic aeroplane manufacturing industry.

Portman said the formal request to establish a WTO hearing panel in the dispute would be filed with the Geneva-based body tomorrow.

“We continue to prefer a negotiated settlement and we would rather not have to go back to the WTO,” Portman said. “By requesting the panel, the US is providing time for the EU to reconsider its plans to provide new subsidies.”

The announcement that the US would file a case against the EU was the latest twist in the extended dispute over whether the world’s two biggest aircraft manufacturers were receiving improper support from their governments.

In January, both sides had agreed to put WTO cases they had filed against each other on hold in an effort to seek a negotiated settlement during a 90-day period.

However, those talks went nowhere as both sides seemed to become entrenched in their positions.

US officials accused the EU of not being serious about the talks while EU Trade Commissioner Peter Mandelson said that the Bush administration had no room to reach a negotiated settlement because of heavy political lobbying by Boeing.

Portman said the administration’s hand was forced because the EU was no longer willing to hold off on providing further government support to Airbus as it developed new planes. Portman also said in the negotiations the EU had only proposed to reduce government subsidies, not end them as the US sought.

“We still believe that a bilateral negotiated solution is possible, but the negotiations won’t succeed unless the EU recommits to ending subsidies,” Portman said.

In Brussels earlier today, the EU announced that it had made a new offer to the US to cut government aid. Officials said that Mandelson had conveyed the offer by telephone to Portman on Friday.

“We are proposing that there be an immediate cut in government support on both sides and after that further cuts,” said Claude Veron-Reville, Mandelson’s spokeswoman.