EU, U.S. conciliatory over aircraft subsidies

BRUSSELS, Belgium — Highlighting a more conciliatory mood since President Bush was re-elected, the United States and the European Union agreed Tuesday to try to amicably settle the decades-old trade dispute over billions of dollars in subsidies to aircraft makers Airbus and Boeing.

The decision to defer pursuing complaints with the World Trade Organization while the governments negotiate a settlement was in sharp contrast to the campaign rhetoric in October, when Bush challenged the 25-nation EU before the world trade body and the EU threatened to retaliate.

“We need open warfare on this issue like we need a hole in the head,” said EU Trade Commissioner Peter Mandelson.

Apart from holding off on legal action at the WTO, both sides committed to stop subsidizing the world’s two biggest aircraft makers during the three-month talks. Both companies have said the temporary stop to public funding would not affect their operations.

“For the first time in this long-standing dispute, the U.S. and the EU have agreed that the goal should be to end subsidies,” U.S. Trade Representative Robert Zoellick said.

After deep rifts caused by disagreements over the war in Iraq, Bush has indicated he wants to mend fences with Europe and will visit the EU head office in Brussels on Feb. 22.

“If we had embarked on this contest at the WTO it might have cast a cloud, or at least a pall, over the president’s visit,” Mandelson said.

A senior U.S. trade official, who spoke only on condition of anonymity, said the Bush administration would still be prepared to go ahead with a WTO case if the negotiations do not produce a satisfactory settlement to end subsidies.

Sen. Patty Murray, D-Wash., welcomed the announcement, but said she and other lawmakers would monitor the talks to make sure any final agreement “truly levels the playing field for our commercial aircraft industry and workers. That is the only acceptable outcome for this most important process.”

Murray and other members of Congress have long complained that Airbus receives billions in cash advances that have enabled it to pursue virtually risk-free product development.

Airbus, which has said it plans to apply for government support to develop its new mid-sized, long-haul A350 — the company’s answer to Boeing’s planned 7E7 Dreamliner — declined to comment.

Boeing President and Chief Executive Harry Stonecipher called the agreement an important step “to establish much-needed balance in the commercial aircraft market.”

“Boeing is encouraged by the good faith displayed by both governments, as evidenced by their understanding not to provide additional development and production support and to refrain from pursuing WTO litigation during the time they are negotiating,” Stonecipher said.

The European Commission said EU and U.S. trade negotiators would try to “eliminate different types of subsidies and to establish fair market-based competition” between the two aircraft manufacturers.

Mandelson said both sides could extend the deadline for talks but insisted he wanted the negotiations done quickly and efficiently. Billions of dollars have been given to the companies during the long-standing dispute.

Tuesday’s deal does not touch current aid programs to Toulouse, France-based Airbus SAS and Chicago-based Boeing Co. Billions of euros given to Airbus’s development and launch of its A380, 555-seat superjumbo will not be renegotiated.

But Hiddo Houben, an aide to Mandelson, said the temporary aid suspension would prevent European governments from committing any launch aid to the new Airbus A350.

Whether Airbus could receive launch aid after that period would depend on the terms of any agreement. The company has repeatedly said its cash flow is strong enough to fund its own development costs, including those of the A350.

The announcement comes after days of intensive talks, EU officials said. It averted a clash at the WTO in Geneva that could have included rulings against both sides for possibly distorting competition in an already cutthroat market.

The new talks will try to renegotiate a 1992 accord that foresaw a gradual reduction in subsidies for aircraft makers.