Two sides stay on attack over subsidies but may resume talks as Mandelson warns on dangers of escalation

As the 11 April deadline for a deal on Airbus and Boeing subsidies approached, Europe and the USA both signalled they were willing to restart stalled negotiations, while continuing to attack each other's positions. If the 90-day negotiating window is not extended, the USA is free to seek a judgement from the World Trade Organisation and Europe is free to grant launch aid to Airbus for the A350.

European trade commissioner Peter Mandelson warned last week that going to the WTO "would be a mistake". Taking the unusual step of writing in the Washington Post, he said a WTO case "of this magnitude would overburden the system", create transatlantic tension, and force Airbus and Boeing to operate under prolonged uncertainty over the outcome.

The US Trade Representative (USTR) said the Airbus-Boeing dispute "is precisely what the WTO was created to handle". Mandelson repeated the call for an initial deal to remove some aid for the A350 and Boeing 787 by 11 April, while continuing negotiations on a wider agreement to eliminate all subsidies – the original intent of the negotiating terms agreed by the EC and USA on 11 January.

Europe is ready to "significantly reduce the amount of launch investment Airbus may receive as a percentage of the total production costs of a new aircraft, or to reduce the duration of the loan, or a combination of both", he said. In return, the EC would expect the USA would reduce its subsidies for Boeing.

Since 1992, Mandelson said, Euro­pean governments have committed $3.7 billion to Airbus in the form of repayable launch aid. He said Boeing had benefited from US government research and development grants worth more than $20 billion over the same period, while Washington state will give the company $3.2 billion in tax incentives, plus $4.2 billion in subsidies for plant and infrastructure im­provements.

The latter figure has puzzled the US side, with Washington state saying the deal struck with Boeing to locate 787 final assembly in Everett only includes around $15 million for dock improvements, $14 million for a training centre, and the acceleration of already planned road improvements.

Mandelson also targeted $1.6 billion in government launch aid for Japanese companies involved in the 787. The US side says the initial deal should focus exclusively on the EU and USA, as specified under the negotiating terms agreed in January. Both sides have accused the other of being unable to negotiate because of political pressure mustered by their respective industries. Mandelson said US negotiator Robert Zoellick had a "mandate from Boeing to get rid of all Airbus's launch investment and to do so immediately, without any delay". US deputy secretary of state Zoellick said some European countries "may not be comfortable moving to the elimination of launch aid".

Speaking in Brussels last week, Zoellick said the USA was willing to continue talks "if the EU can follow through on those core principles we agreed in January". These include reaching a bilateral agreement to eliminate all subsidies. "If not," he said, "that's what the multilateral [WTO] system is there for."


Source: Flight International