The EU's executive commission is to retaliate at the WTO against a US decision to reactivate WTO action against European subsidies for Airbus, an EU source said yesterday.
"Of course, we're going to retaliate," the source said.
The move comes after Washington said that it would ask the WTO yesterday to create an arbitration panel to resolve a dispute over European subsidies to aircraft maker Airbus.
"The United States announced today [Monday] that it will file a request for the establishment of a World Trade Organization dispute settlement panel to resolve the dispute. The panel request will be filed on Tuesday, May 31," the US trade representative (USTR) said in a statement it released on Monday.
The EU and the US both filed WTO suits against each other in October but agreed in January to shelve action in order to seek a negotiated deal.
The US action came despite a fresh proposal on Friday by EU trade commissioner Peter Mandelson on how to settle the dispute through negotiations.
Mandelson told reporters in Geneva yesterday that the US action was "highly regrettable from the standpoint of all those who believe that the WTO has better things to do with its time than referee this grudge fight of Boeing against Airbus."
The simmering dispute over aid to Airbus and Boeing has become inflamed lately after Airbus requested British government aid for its A350 long-haul plane which is designed to compete with Boeing's plans to launch the 787 Dreamliner.
The US believes financial aid given to Airbus to launch new aircraft is illegal, while the Europeans accuse Washington of subsidizing Boeing through military contracts.
"For almost a year, the United States has tried to convince the EU to negotiate an end to subsidies for large civil aircraft," US Trade Representative Rob Portman said in the statement.
"So we were pleased when, on January 11th of this year, the EU agreed to a standstill on launch aid while we negotiated an end to subsidies. Unfortunately, at this point, the EU is no longer willing to hold off on launch aid, and has only proposed to reduce subsidies, not end them," Portman said.
The USTR said by requesting the arbitration panel, Washington is providing time for the EU to reconsider its plans to provide new subsidies and recommit to the deal struck in January.
"This would include an immediate halt to any further steps toward providing new launch aid and a recommitment that the purpose of the negotiations is to end new subsidies for Large Civil Aircraft (LCA), and not merely to reduce them," the USTR said.
"We still believe that a bilateral negotiated solution is possible," Portman said, noting that out of the 100 concluded WTO cases involving the US since the WTO was founded, over a third were satisfactorily resolved following negotiation.
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