1279shp
1st Jun 2005, 21:12
Europe hit back at the United States in the biggest commercial dispute in history on Tuesday, reviving a lawsuit against billions of dollars in aid to aircraft giant Boeing.
European Union Trade Commissioner Peter Mandelson voiced regret at the multi-billion dollar "gladiatorial contest" set to be played out at the World Trade Organization (WTO), blaming it squarely on Boeing's "tight political grip" on Washington.
"I am disappointed that the United States has chosen confrontation with Europe," he told reporters a day after Washington reopened a WTO case against Airbus aid. "The WTO has better things to do with its time than referee a grudge fight."
The costly showdown at the Geneva-based trade body, which may drag on until the end of 2006, could put a severe strain on transatlantic relations at a time when the two sides are trying to bury friction over the US-led invasion of Iraq.
Brussels and Washington said in a joint statement on Monday that they would not let their aviation spat affect other issues, including negotiations with developing nations on a global free trade blueprint that are due to reach a climax in December.
"I am absolutely determined to make sure that whatever blood is spilled in this aircraft dispute... that key negotiators don't fall out over it in a way that adversely affects the (trade) round," Mandelson said.
Nevertheless, the stakes will be huge.
The biggest transatlantic trade face-off to date was over US export tax breaks worth USD$4 billion a year. But the two sides accuse each other of paying their aircraft makers many times that sum, and the winner in a WTO case could be allowed to retaliate to recover many billions of dollars in lost sales.
Brussels and Washington agreed in January to put competing cases filed at the WTO on ice, and seek a negotiated settlement that would eliminate subsidies for their aircraft champions.
Talks broke down on Monday after the EU said that, to avert a WTO clash, it had offered to cut "launch aid" loans for Airbus's planned A350 airliner by around 30 percent providing 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 prefer a negotiated outcome, but since some European member states are clearly moving to grant launch aid, our hand has been forced," US Trade Representative spokesman Richard Mills said after the EU formally revived its lawsuit in Geneva.
Mandelson said the US move appeared to have been timed so that Boeing could "rain on Airbus' parade" at the Paris air show in mid-June, at which the company hopes to launch the A350.
Airbus, owned by Franco-German-Spanish aerospace firm EADS and Britain's BAE Systems, snatched the crown as the world's largest commercial aircraft maker from Boeing in 2003.
Mandelson complained that the United States had only ever wanted to discuss an immediate end to launch investment for Airbus and had never wanted to engage in a "serious, even-handed discussion of the much larger subsidy programs for Boeing".
His office issued a breakdown of the support channelled to the two companies since 1992, concluding that for Airbus it was USD$3.7 billion while for Boeing it was much higher at USD$29 billion.
It said Boeing's aid included tax breaks in its industrial homeland, Washington State, federal contracts for military and space research, support from Tokyo for building 787 wings in Japan and export subsidies declared illegal by the WTO.
Boeing estimates that Airbus has received about USD$15 billion worth of launch loans since 1967, which amounts to about USD$40 billion in subsidy benefits because of generous repayment terms.
The collapse of negotiations means that European governments will be able to respond to Airbus's requests for around EUR1 billion (USD$1.23 billion) to launch its mid-sized A350.
The WTO has only once ordered the loser in a subsidies row to repay aid deemed illegal, and in the end that did not happen.
European Union Trade Commissioner Peter Mandelson voiced regret at the multi-billion dollar "gladiatorial contest" set to be played out at the World Trade Organization (WTO), blaming it squarely on Boeing's "tight political grip" on Washington.
"I am disappointed that the United States has chosen confrontation with Europe," he told reporters a day after Washington reopened a WTO case against Airbus aid. "The WTO has better things to do with its time than referee a grudge fight."
The costly showdown at the Geneva-based trade body, which may drag on until the end of 2006, could put a severe strain on transatlantic relations at a time when the two sides are trying to bury friction over the US-led invasion of Iraq.
Brussels and Washington said in a joint statement on Monday that they would not let their aviation spat affect other issues, including negotiations with developing nations on a global free trade blueprint that are due to reach a climax in December.
"I am absolutely determined to make sure that whatever blood is spilled in this aircraft dispute... that key negotiators don't fall out over it in a way that adversely affects the (trade) round," Mandelson said.
Nevertheless, the stakes will be huge.
The biggest transatlantic trade face-off to date was over US export tax breaks worth USD$4 billion a year. But the two sides accuse each other of paying their aircraft makers many times that sum, and the winner in a WTO case could be allowed to retaliate to recover many billions of dollars in lost sales.
Brussels and Washington agreed in January to put competing cases filed at the WTO on ice, and seek a negotiated settlement that would eliminate subsidies for their aircraft champions.
Talks broke down on Monday after the EU said that, to avert a WTO clash, it had offered to cut "launch aid" loans for Airbus's planned A350 airliner by around 30 percent providing 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 prefer a negotiated outcome, but since some European member states are clearly moving to grant launch aid, our hand has been forced," US Trade Representative spokesman Richard Mills said after the EU formally revived its lawsuit in Geneva.
Mandelson said the US move appeared to have been timed so that Boeing could "rain on Airbus' parade" at the Paris air show in mid-June, at which the company hopes to launch the A350.
Airbus, owned by Franco-German-Spanish aerospace firm EADS and Britain's BAE Systems, snatched the crown as the world's largest commercial aircraft maker from Boeing in 2003.
Mandelson complained that the United States had only ever wanted to discuss an immediate end to launch investment for Airbus and had never wanted to engage in a "serious, even-handed discussion of the much larger subsidy programs for Boeing".
His office issued a breakdown of the support channelled to the two companies since 1992, concluding that for Airbus it was USD$3.7 billion while for Boeing it was much higher at USD$29 billion.
It said Boeing's aid included tax breaks in its industrial homeland, Washington State, federal contracts for military and space research, support from Tokyo for building 787 wings in Japan and export subsidies declared illegal by the WTO.
Boeing estimates that Airbus has received about USD$15 billion worth of launch loans since 1967, which amounts to about USD$40 billion in subsidy benefits because of generous repayment terms.
The collapse of negotiations means that European governments will be able to respond to Airbus's requests for around EUR1 billion (USD$1.23 billion) to launch its mid-sized A350.
The WTO has only once ordered the loser in a subsidies row to repay aid deemed illegal, and in the end that did not happen.