LexisNexis(TM) Academic - Document

Financial Times (London, England)

May 31, 2005 Tuesday
London Edition 2

SECTION: WORLD NEWS; Pg. 10

LENGTH: 430 words

HEADLINE: Hostilities bring Airbus hopes back to earth

BYLINE: By EDWARD ALDEN and RAPHAEL MINDER

DATELINE: BRUSSELS and WASHINGTON

BODY:


A day that started with the European Union claiming that it had breathed new life into stalled negotiations with the US over aircraft subsidies to Boeing and Airbus ended with Washington reactivating the biggest dispute in the history of the World Trade Organisation.

While Peter Mandelson and Rob Portman, the respective chief trade negotiators for the EU and the US, said last night in a joint statement that "this dispute shall not affect our co-operation on wider bilateral and multilateral trade issues", Mr Mandelson has repeatedly warned that such litigation could hinder efforts to complete the Doha round of world trade talks. Furthermore, it could prove self- defeating for both sides, given a previous instance of WTO aircraft subsidy arbitration and the complexity of the mutual recrimination.

The US is challenging the legality of about Dollars 15bn (Euros 12bn, Pounds 8bn) of launch aid to Airbus, while the EU claims Boeing has benefited from Dollars 23bn of prohibited subsidies. On Friday Mr Mandelson presented a "fresh proposal" to Mr Portman, understood to involve a proposed cut of about a third in the launch aid granted to Airbus for its A350 and other future aircraft projects.

However, Mr Mandelson's decision to publicise his gesture drew a scornful response from Washington. Richard Mills, USTR spokesman, said: "We are extremely disappointed that they've begun spinning to the press." That was a sensitive jibe, given Mr Mandelson's reputation in British politics as an adroit handler of the media. It also echoed a war of words in March between Mr Mandelson and Mr Portman's predecessor as US trade representative, Robert Zoellick, which was sparked by a similar "spinning" accusation from Mr Zoellick and which in effect ended negotiation efforts.

But beyond the apparent failure to end the acrimony, the resumption of WTO action reflects the extent to which the two sides started from irreconcilable positions. While the EU has insisted that it cannot simply scrap launch aid, the key form of financial assistance granted to Airbus, the US has set the elimination of launch aid as a prerequisite for agreement.

In the end, the negotiating efforts have also been dependent on the commercial priorities of the two manufacturers. For the US, the calculation over the past year has been whether it was better to force the issue immediately at the WTO or hope for a negotiated deal. Under the WTO's cumbersome dispute settlement procedures, it could take more than 18 months before an initial decision is reached and then another year or more to resolve appeals.

LOAD-DATE: May 31, 2005