Talks to resolve a dispute between the EU and US over alleged unfair subsidies to plane maker Airbus ended in deadlock on Thursday, raising fears of a trade war between the two blocs.
The US may take the EU to the World Trade Organization (WTO) over the issue, which comes as Airbus is battling for supremacy with its US rival Boeing. Yesterday the EU threatened to counter-sue.
After five hours of talks European commission officials warned mutual litigation could put at serious risk Boeing Co's plans to develop its 7E7 Dreamliner jet. The US manufacturer could be forced to repay billions of dollars in aid if the US lost any WTO case.
The dispute between Airbus and Boeing has been heightened by the US election campaign and the issue of jobs. John Veroneau, general counsel to US trade representative Robert Zoellick, expressed disappointment that the EU had failed to agree on the need to scrap all new subsidies for large civil aircraft. Visibly disgruntled by the European approach, he said the Airbus A380 was a direct competitor to the 7E7 and had received more aid.
"Logically, if anything, there would be much more justification for extra government support for Boeing," he said.
Trade officials from the EU said WTO litigation would damage Boeing since, unlike the A380 which is under construction, the 7E7 is in the development phase and WTO rulings do not apply retrospectively.
The US wants wholesale renegotiation of a 1992 agreement on state aid, drawn up when Airbus enjoyed a smaller market share than it does now. It argues that, now the two rivals have achieved parity in terms of sales, all subsidies should end.
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