US Goes To The WTO Over Airbus Aid

by Mike Godfrey, for LawAndTax-News.com, New York

01 June 2005

As the EU's Airbus consortium continues to round up launch aid for its proposed long-range A350, the Bush administration announced on Monday that it is proceeding with a reference to the WTO against the EU for providing alleged illegal subsidies.

Recently-appointed US Trade Representative Rob Portman said the United States would take its case before the World Trade Organization because EU member states were going ahead with $1.7 billion in new subsidies to Airbus, after the failure of a negotiated settlement. "The EU's insistence on moving forward with new launch aid is forcing our hand," said Portman.

Agreement between the two sides to talk seemed in January to be an early triumph for new UK Trade Commissioner Peter Mandelson, but after fruitless negotiations the US warned in March that it would re-open the stalled WTO case. "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."

The EU had offered over the weekend to cut the A350 launch aid by a third; but this wasn't enough for the US. which demands that the EU should completely eliminate the aid before it will take the axe to Boeing's various government support programs. "For almost a year, the United States has tried to convince the EU to negotiate an end to subsidies for large civil aircraft," said Rob Portman. "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."

Portman said on Monday that he believed there was still hope for avoiding the WTO case. "We still believe that a bilateral, negotiated solution is possible," he said, adding, "but the negotiations won't succeed unless the EU recommits to ending subsidies."

However, Portman and Mandelson were anxious to underline their continuing good relations: "We remain united in our determination that this dispute shall not affect our cooperation on wider bilateral and multilateral trade issues," they said. "We have worked together well so far, and intend to continue to do so."

Yesterday, the US asked the WTO to establish a dispute-settlement panel, but the USTR's Mills said that precedent showed a settlement was possible. "We're the only country to file a WTO case brought against China. We got it resolved before we even formed a panel," Mills said.

Claude Veron-Reville, European Commission spokesperson for trade said: "This is a disappointing move by the United States given the proposals for a negotiated solution the EU side made on Friday."

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