June 1, 2005 in Business

Gloves off in Boeing aid case

Associated Press
 

BRUSSELS, Belgium — Digging in for a new trade war with Washington, the European Union filed a counter complaint Tuesday at the World Trade Organization claiming that U.S.-based Boeing Co. receives illegal government aid.

EU Trade Commissioner Peter Mandelson said he had little choice but to retaliate because the United States decided to close the door on reaching an amicable solution to the standoff between Boeing and France-based Airbus.

“The path of negotiations has been closed,” Mandelson said, laying the blame for the new trade war at the feet of the Americans after the Bush administration decided late Monday to abandon negotiations that began in January and take the EU to a legal panel at the WTO.

The WTO confirmed Tuesday that it had received complaints from both the United States and EU.

Mandelson said the WTO action could only rupture fragile EU-U.S. ties, adding that taking the talks to the WTO would accomplish nothing.

“America’s decision will, I fear, spark the biggest, most difficult and costly legal dispute in the WTO’s (10-year) history,” he said.

In announcing the U.S. decision late Monday, Trade Representative Rob Portman said the Bush administration felt it had to act because of preparations being made by EU member nations to commit $1.7 billion to Airbus for developing a new airplane, the A350, which is seen as a direct competitor to Boeing’s new 787 Dreamliner.

Mandelson said the U.S. move was ironic because the WTO action now opens the door for EU governments to feed Airbus the aid it needs to launch the new model.

“If the Americans had opted for a deal I offered on the table, and accepted a negotiated settlement, they would have immediately seen a sharp reduction” in launch investment, Mandelson said.

Analysts said any WTO-imposed cuts in aid to the two companies could result in higher ticket prices for travelers.

“If there are fewer subsidies for manufacturers, that will transfer into higher costs for carriers and, ultimately, the traveling public,” said aviation analyst Richard Aboulafia of Fairfax, Va.-based Teal Group.

Boeing spokesman Dick Dalton countered Aboulafia’s claim by saying in an e-mail that an end to subsidies would “ensure true competition — to the ultimate benefit of airlines, passengers, parts suppliers and the airplane manufacturers.”

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