Subsidy row referred to World Trade Organization
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Manufacturing News, Source : The Manufacturer US
Published : 31 May 2005 15:47
An “entente discordiale” has developed between the United States and Europe over subsidies to their respective aircraft manufacturers Boeing and Airbus, after talks to resolve the dispute broke down at the end of last week.
The Bush administration announced its intention yesterday to refer the matter to the World Trade Organization. The European Commission is expected to bring a counter case to the WTO today. The case is expected to be the largest ever heard by the WTO, involving up to $40 billion in government aid.
Talks have been under way since January, aiming to put an end to all government subsidies to Boeing and Airbus and establish "fair market competition" in the development and production of large civilian aircraft in Europe and the United States.
The Europeans upset the United States trade representative, Rob Portman, on Friday, however, by offering a compromise to cut about a third of subsidies for a prototype airliner, the Airbus A350, in exchange for agreement by the United States to similar reductions in support of Boeing jets. The US, however, is insisting that Europe ends all subsidies to Airbus, including what it calls “launch aid”, low-interest loans to assist in the development of new aircraft.
European trade officials claim, on the other hand, that the United States has paid Boeing "massive illegal subsidies that damage Airbus," through tax benefits and subsidized research and development. The dispute seems to have come to a head because the A350, unlike the super jumbo A380, is a direct competitor with Boeing’s new 787 Dreamliner.
Mr. Portman said that the two sides had agreed to a full suspension of all subsidies and that the European Union was required to respect that agreement. "Unfortunately, at this point," he said, "the EU is no longer willing to hold off on launch aid, and has only proposed to reduce subsidies, not end them." He did say that the US would still prefer a settlement, however. "We still believe that a bilateral negotiated solution is possible."
Referral of this dispute to the WTO came within hours of the French referendum that rejected the proposed European Union constitution.
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