LexisNexis(TM) Academic - Document

LexisNexis(TM) Academic - Document
Copyright 2005 The Financial Times Limited
Financial Times (London, England)

April 11, 2005 Monday
London Edition 3

SECTION: WORLD NEWS; Pg. 8

LENGTH: 516 words

HEADLINE: EU moves to avoid Airbus showdown

BYLINE: By EDWARD ALDEN and RAPHAEL MINDER

DATELINE: BRUSSELS and WASHINGTON

BODY:


The European Union offered yesterday to delay the payment of launch aid for Airbus's A350 aircraft to avoid the biggest battle in the history of the World Trade Organisation.

The gesture came ahead of a self-imposed deadline today to settle the dispute over aircraft subsidies. Recent acrimony and lack of progress in the negotiations mean the deadline will be missed but the US and the EU expressed willingness to continue to "review the situation" rather than trigger WTO litigation.

The latest statements also suggested a desire to draw a line under recent personal tensions. Robert Zoellick, the US trade chief, last week sharply criticised the negotiating style of Peter Mandelson, his European counterpart. Mr Mandelson wrote to Mr Zoellick on Friday urging resumption of the talks in an attempt to mend fences, according to people involved.

The A350 is set to be a competitor to Boeing's 787 Dreamliner, partly built in Japan. Airbus has said it would seek Euros 1bn (Pounds 680m) in launch aid for the A350, but Washington warned it would only prolong the truce as long as that was withheld.

An aide to Mr Mandelson, EU trade commissioner, said yesterday: "We are not agreeing to a further formal standstill but clearly, if we are going to use the time available to us, then launch aid will not be disbursed now."

If the US rejects Mr Mandelson's offer and takes the dispute to the WTO, it is unlikely to be resolved before Airbus gets the launch aid. In that case, Boeing's hopes would rest on a WTO ruling that might discourage US airlines from buying the A350 for fear that imports might be hit by retaliatory US trade sanctions.

When they agreed a truce in January, the two sides gave themselves 90 days to negotiate an agreement to end subsidies to civil aircraft, a period during which they also pledged to freeze future subsidies to Boeing and Airbus.

Mr Mandelson has warned against WTO arbitration that could find both sides at fault.

He said on Saturday: "I regret that it has not been possible to reach an interim agreement by April 11. But given the complexity of the issues, this is perhaps not surprising. Both sides should now pause for further thought and review the situation."

Because of the imminent payment of A350 launch aid, Airbus appears to have more to lose than Boeing should the discussions drag on, but it is also an awkward time for Washington's negotiators because of changes in the US administration.

Following George W. Bush's re-election, Mr Zoellick has become US deputy secretary of state, but he will continue to handle the aircraft dispute until Rob Portman is confirmed as trade representative.

Airbus has outpaced Boeing in recent years to become the world's largest aircraft manufacturer.

Washington alleges the European group has benefited from at least Dollars 15bn (Pounds 7.9bn) in illegal launch aid from France, the UK, Germany and Spain, while the EU claims Boeing has received Dollars 23bn in prohibited subsidies since 1992 and has challenged the role played by Washington State and Japan in financing Boeing's 787 aircraft. Illuminating change, Page 38

LOAD-DATE: April 10, 2005