LexisNexis(TM) Academic - Document

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

January 27, 2005 Thursday
London Edition 1

SECTION: INTERNATIONAL ECONOMY; Pg. 10

LENGTH: 463 words

HEADLINE: End European air subsidies to avert WTO fights, says Boeing chief

BYLINE: By ALAN BEATTIE and RAPHAEL MINDER

DATELINE: DAVOS and BRUSSELS

BODY:


A senior Boeing executive yesterday warned that only a complete end to European state subsidies for aircraft development would avoid the resumption of hostilities in the World Trade Organisation.

Thomas Pickering, Boeing's senior vice-president for international relations, added that Boeing welcomed the agreement announced two weeks ago between Robert Zoellick, the outgoing US trade representative, and Peter Mandelson, EU trade commissioner, to attempt a negotiated deal.

Without conceding the validity of the EU's counter-complaints that Boeing received implicit subsidies from defence contracts and local tax breaks, he admitted that they were up for negotiation. But he told the Financial Times a complete end to "launch aid" - European state subsidies to Airbus for development - would be essential to any agreement.

"Our feeling is that launch aid is the one totally inequitable proposition on the table because it is one-sided, only one side gets it and only one side will ever get it," he said. "There is always on each side the possibility that if we do not move ahead satisfactorily, we would then go back to looking at the question of litigation."

Asked whether he was sure an end to launch aid was possible under current negotiations, he said: "We are entirely convinced because the existing regime in the WTO clearly rules out subsidies. Launch aid is illegal under the WTO."

Mr Pickering's intervention underlines the difficulty that both sides will have in reaching a negotiated agreement over aircraft subsidies.

The day after the Zoellick-Mandelson announcement, Noel Forgeard, chief executive of Airbus, said Airbus had applied for about Euros 1bn (Dollars 1.3bn) in launch aid for the planned A350 long-range airliner.

Mr Mandelson yesterday stressed that the negotiations could not simply be boiled down to whether Airbus should be entitled to launch aid or not.

"The aim of the negotiations is to eliminate subsidies and within this objective to see what is allowed and what isn't ... We are first going to have to agree on definitions ...

"What is one person's launch aid is another person's subsidy."

Mr Mandelson also stressed the "colossal risks" facing the aircraft industry. "There is no way you would take the risks involved in that sector without some sort of government guarantees," he said.

The US was criticised by some trade experts for bringing a case to the WTO's dispute resolution procedure rather than settling the issue through negotiations based on a 1992 bilateral aviation agreement.

It was intensification of Boeing lobbying that was regarded as instrumental in getting the US government to bring a case to the WTO in the first place.

But Mr Pickering said: "To be taken seriously by the EU and by Airbus, we had to raise the issue of the case."

LOAD-DATE: January 26, 2005