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Financial Times (London, England)

May 31, 2005 Tuesday
London Edition 3

SECTION: FRONT PAGE - FIRST SECTION; Pg. 1

LENGTH: 293 words

HEADLINE: US calls in WTO to end Airbus subsidies

BYLINE: By EDWARD ALDEN and RAPHAEL MINDER

DATELINE: WASHINGTON and BRUSSELS

BODY:


The row between the US and the European Union over aircraft subsidies escalated last night as Washington said it would today ask for a World Trade Organisation dispute settlement panel aimed at halting all government support for Airbus, the European group.

The US rejected outright a European Union proposal to cut launch aid for new commercial aircraft by about a third.

The announcement, which came late on the Memorial Day US holiday, ends for the moment prospects for a negotiated settlement and raises the odds of eventual punitive trade retaliation by one or both sides.

While the US had stepped up its threats recently to seek a WTO panel, the timing was a surprise, coming just as Europe has been plunged into a constitutional crisis, and only three days after Brussels had made a fresh proposal aimed at reaching a negotiated deal.

Peter Mandelson, the EU's trade commissioner, told Rob Portman, the US trade representative, in a telephone call, that Europe was prepared to cut the Euros 1.3bn (Pounds 890m) launch aid for Airbus's A350 and other aircraft projects by about a third.

Mr Mandelson's spokeswoman said yesterday: "This is a disappointing move by the US, given the proposals for a negotiated solution the EU side made on Friday."

Mr Mandelson is expected to announce today in Brussels a counter-complaint, along the lines of the one filed by the EU last October when the US first brought the issue before the WTO. The EU claims Boeing has benefited from about Dollars 23bn of prohibited subsidies since 1992.

It is likely to be 18-24 months before a panel rules on the dispute, giving both sides time to negotiate a solution. The US will target not only future support but also the "effects" of past subsidies. Quick resolution unlikely, Page 10

LOAD-DATE: May 31, 2005