Boeing Plan Is Brewing Hot Rhetoric U.S. Tells European Union To Tone Down All The Posturing

The U.S. turned up pressure on the European Union to tone down its rhetoric on Boeing Co.’s proposed acquisition of McDonnell Douglas Corp.

U.S. Trade Rep. Charlene Barshefsky said the U.S. is “concerned” with “some of the rhetoric coming from Europe in advance of the facts” on the proposed $15 billion combination.

While U.S. antitrust officials approved the combination, a European Union antitrust commission last week recommended the EU reject it because it would increase Boeing’s market share for jetliner sales and service worldwide.

EU officials are considering asking Boeing to put McDonnell Douglas civilian aircraft up for sale, administration officials said. U.S. officials also say the EU may be trying to extract trade concessions from the U.S. in exchange for approving the combination.

“We expect the EU review to be conducted solely on competition policy grounds and not on a political basis,” Barshefsky said.

The European Union will make its decision on July 23. “We will look carefully” at what the EU decides, Barshefsky said. She wouldn’t comment on whether the U.S. would consider retaliating for any sanctions the EU might impose on Boeing if the two companies proceed with the merger without EU approval.

A senior U.S. trade official said earlier this week that the U.S. is considering a wide range of sanctions and a possible complaint to the World Trade Organization.

The EU has no authority to block the combination yet could impose fines of as much as 10 percent of the company’s revenue.

Clinton administration officials say the EU is using the Boeing case to try to force the U.S. to renegotiate a 1992 treaty limiting the aid governments can provide for new aircraft development. They note that Boeing’s European rival Airbus Industrie’s plan to develop a 600-seat plane requires government aid to cover $9 billion to $12 billion in development costs.

Barshefsky said the U.S. would refuse to reopen the 1992 agreement limiting the amount of subsidy governments can provide to their aircraft makers. The Europeans, Barshefsky said, asked before the Boeing merger was announced, that the treaty be reopened on an “emergency basis.” U.S. officials suspect the Europeans would like to use the Boeing-McDonnell dispute as a lever to force the U.S. to renegotiate the subsidy limits.

“We have said we see no emergency whatsoever,” said Barshefsky.

The EU has said it’s unhappy with U.S. enforcement of the 1992 bilateral pact, which places caps on the amount of financial support governments can provide for the development of commercial aircraft. The Europeans complain that U.S. aerospace manufacturers are using defense and space program grants from the U.S. government to subsidize commercial aircraft development.

Semiannual talks on the subsidy agreement are underway in Washington.