EU/US Talks Over Aircraft Subsidies Hit The Buffers

by Jason Gorringe, Tax-News.com, London

22 March 2005

After months of fruitless bilateral talks to try to resolve an impasse over aircraft subsidies, the US and EU appear set to take their Boeing/Airbus spat to the World Trade Organization, in what would be the WTO's largest case ever.

"Despite our best efforts, it's clear the EU is unwilling to eliminate launch aid subsidies," said Richard Mills, spokesman for the US Trade Representative's office. "Although on Jan. 11 the EU agreed to a negotiation structure for eliminating large civil aircraft subsidies, over the last two months they have been backtracking and seeking to change terms of that agreement."

Agreement between the two sides to talk seemed in January to be an early triumph for new UK Trade Commissioner Peter Mandelson, but this weekend's declaration by the US may put an end to talks. Mandelson told reporters that he was surprised by the US decision, which he heard about in a telephone conversation with Robert Zoellick, who is still managing the Boeing/Airbus dossier despite having been promoted to the State Department.

The surprise development may indicate that the 5-year trade love-in between the US and the EU fostered by Zoellick and Pascal Lamy has come to a definitive end. Their collegiate approach to transatlantic trade disputes - both of them being marathon runners in private as well as public life - had cast a golden glow over otherwise intractable disputes.

"The United States is willing to hold up to the standstill terms of the Jan. 11 agreement that precluded further subsidies, but if the EU either breaks or refuses to extend the terms, we will return to litigation to eliminate subsidies," said Mr. Mills.

It's not clear what in particular the EU has said or done to upset the Americans at this point.

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