US reopens WTO case against EU

This Is Money13 April 2012

THE US has reactivated a World Trade Organisation (WTO) case against European Union subsidies for aircraft maker Airbus. US trade officials said the decision followed the failure of the latest efforts to reach a negotiated settlement.

'The WTO received this morning a letter from the United States requesting... the establishment of a panel,' the Geneva-based trade body said in a brief statement.

European Trade Commissioner Peter Mandelson vented his irritation with the US decision yesterday saying Washington had only been pretending to talk in recent days.

'We in Europe were still seeking to negotiate an agreed solution, while the US was planning last week to take this issue to the WTO,' he said. 'This decision is highly regrettable for those that think the WTO has better things to do with its time than referee a grudge fight.'

The legal action at the Geneva-based WTO over billions of dollars in aid is likely to be the largest commercial dispute in history and will put a severe strain on transatlantic relations.

The two sides said in a joint statement on Monday that they would not let their aviation spat spill into other trade areas, including negotiations with developing nations for a global free trade blueprint that are due to reach a climax in December.

The breakdown in talks came after the EU announced that, to avert a WTO showdown, it had offered to cut 'launch investment' loans for Airbus's planned A350 airliner by around 30%, provided that this was balanced by cuts in support to Boeing.

That was not enough for Washington, which - worried that soft loans from EU states for the A350 could challenge Boeing's new 787 Dreamliner - wants such aid to stop altogether.

'We would rather not have to go back to the WTO. But the EU's insistence on moving forward with new launch aid is forcing our hand,' said US Trade Representative Rob Portman.

'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,' he said in a statement.

The EU argues Boeing is effectively subsidised by tax breaks in Washington State, federal contracts for military and space research and support from Japan for assembly work there.The two sides agreed in January to put their competing cases on ice to hammer out an accord that would eliminate subsidies.

Boeing, which lost the crown as the world's largest commercial aircraft maker to Airbus in 2003, said in a statement that it was fully behind Portman's decision to go back to the WTO.

Airbus, which is owned by Franco-German-Spanish aerospace firm EADS and Britain's BAE Systems, is expected to ask for up to €1bn (£720m) in repayable state loans from European governments for the A350.

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