Sun, Apr 17, 2005 - Page 11 News List

US says patience running out over EU airplane spat


The United States said Friday it remained willing to negotiate with Europe to resolve a bitter trade row over aircraft subsidies, but warned its patience was running out.

Chief US negotiator Robert Zoellick has responded to a letter from EU Trade Commissioner Peter Mandelson spelling out Washington's demand that no new government aid be extended to European aircraft giant Airbus, an official said.

"Zoellick responded on Monday to Commissioner Mandelson's letter, and his response ended with a simple question: Is the EU willing to continue to negotiate under the terms of the January 11 agreement, including the standstill on subsidies?" the senior trade official said on condition of anonymity.

Under the January accord, the United States and European Union gave themselves 90 days to resolve their dispute over state aid to Airbus and its US rival Boeing.

They agreed in the meantime not to extend any fresh subsidies or to seek arbitration at the World Trade Organization. That deadline expired Monday with no deal.

Matters have not been helped by strained relations between Zoellick, the number two at the US State Department and until recently US Trade Representative, and the British EU trade chief.

US sources also complain about a lack of clarity in the EU position.

Officially, Brussels under Mandelson has been taking the lead in the negotiations. But France now says it is willing to consider extending "launch aid" to the Airbus A350, potentially torpedoing any chance of a bilateral deal.

The new long-range, mid-sized A350 is destined to rival Boeing's new 787 Dreamliner, which itself is the US company's answer to the European conglomerate's A380 superjumbo.

Both companies are staking their futures on the new models, confident that each has the answer to the travel industry's long-term demands. That makes the subsidies row all the more sensitive.

The US Congress passed a joint resolution this week calling on Zoellick to ask the WTO to step in "at the earliest possible opportunity" unless the EU refuses to give aid for the A350 and "all future models" by Airbus.

It also said that President George W. Bush "should take any additional action the President considers appropriate to protect the interests of the United States in fair competition in the large commercial aircraft market."

With Zoellick's new intervention, "the Americans want to signal that they don't want to wait forever for a resumption of the negotiations," a source close to the case said.

The EU's executive commission this week declined to say how long the standoff could continue.

Discussions between Brussels and Washington were continuing, a spokeswoman for the EU trade commissioner said, despite the abrupt end to a telephone conversation between Mandelson and Zoellick two weeks ago.

But on Tuesday, the French government said it would resume consideration of public aid for the new A350 in the form of reimbursable advances.

The US government says that those advances and other "market distorting subsidies" have amounted to US$30 billion down the years for Airbus, without which it could never have overtaken Boeing.

The EU in turn says that Boeing benefits from billions of dollars in indirect assistance through the form of federal money for military research, financial incentives from US states, and export tax breaks.

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