EU hits back in airplane dispute
Published: Wednesday, June 1, 2005 at 6:01 a.m.
Last Modified: Wednesday, June 1, 2005 at 12:22 a.m.
BRUSSELS, Belgium - Digging in for a new trade war with Washington, the European Union filed a counter complaint Tuesday at the World Trade Organization claiming that U.S.-based Boeing Co. receives illegal government aid.
EU Trade Commissioner Peter Mandelson said he had little choice but to retaliate because the United States decided to close the door on reaching an amicable solution to the standoff between Boeing and France-based Airbus.
''The path of negotiations has been closed,'' Mandelson said, laying the blame for the new trade war at the feet of the Americans after the Bush administration decided late Monday to abandon negotiations that began in January and take the EU to a legal panel at the WTO.
The WTO confirmed Tuesday that it had received complaints from both the United States and EU.
Mandelson said the WTO action could only rupture fragile EU-U.S. ties, adding that taking the talks to the WTO would accomplish nothing.
''America's decision will, I fear, spark the biggest, most difficult and costly legal dispute in the WTO's (10-year) history,'' he said.
In announcing the U.S. decision late Monday, Trade Representative Rob Portman said the Bush administration felt it had to act because of preparations being made by EU member nations to commit $1.7 billion to Airbus for developing a new airplane, the A350, which is seen as a competitor to Boeing's new 787 Dreamliner.
Mandelson said the U.S. move was ironic because the WTO action now opens the door for EU governments to feed Airbus the aid it needs to launch the new model.
''If the Americans had opted for a deal I offered on the table, and accepted a negotiated settlement, they would have immediately seen a sharp reduction'' in launch investment, Mandelson said. ''This will take years to resolve and in the meantime it's open to Airbus to receive any amount of launch investment from member states prepared to make that investment.''
Analysts said any WTO-imposed cuts in aid to the two companies could result in higher ticket prices for travelers.
''If there are fewer subsidies for manufacturers, that will transfer into higher costs for carriers and, ultimately, the traveling public,'' said aviation analyst Richard Aboulafia of Fairfax, Va.-based Teal Group.
Boeing spokesman Dick Dalton countered Aboulafia's claim by saying in an e-mail that an end to subsidies would ''ensure true competition - to the ultimate benefit of airlines, passengers, parts suppliers and the airplane manufacturers.''
Mandelson said he had offered Friday ''to negotiate a 30 percent reduction in launch investment available to the A350 in return for a similar offer for Boeing.'' But U.S. officials viewed the offer as a step back from an earlier goal to eliminate all subsidies.
''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 Monday.
Mandelson said any Airbus investment would be repaid to governments, unlike aid given to Boeing.
''Nothing of the like exists in respect of Boeing, not one cent, not one dollar has to be paid back by Boeing,'' he said.
The A350 won't be available until 2010, while Boeing's 787 Dreamliner is expected to be available for delivery in 2008.
Airbus' owners, the European Aeronautic Defence and Space Co. and Britain's BAE Systems PLC, warned that the litigation was ''in the interest of none of the stakeholders,'' and called Boeing's 787 ''the world's most subsidized airline ever.''
Reader comments posted to this article may be published in our print edition. All rights reserved. This copyrighted material may not be re-published without permission. Links are encouraged.
Comments are currently unavailable on this article