"I regret this unilateral action in breaking off" trans-Atlantic talks to resolve a decades-long dispute over government subsidies provided to aircraft giants Boeing and Airbus, EU Trade Commissioner Peter Mandelson on Saturday.

 Earlier, on Friday, the office of US Trade Representative Robert Zoellick had accused Mandelson of negotiating in bad faith after he met Zoellick in Washington.

 

Zoellick was recently named deputy secretary of state, but continues to represent the United States in talks over Airbus.

 

In a terse reaction to the American threat, Mandelson said while he fully understood the difficulties. "We could have overcome them with further effort".

 

"we could have overcome them with further effort"

EU trade Commissioner Peter Mandelson

 

"I am happy to return to the negotiating table and perhaps the new US trade representative will look at that," Mandelson said, referring to Zoellick's successor.

 

This week, US President Bush named Rob Portman, a Republican congressman from Ohio, to the post.

 

The EU and the United States had agreed in January to try to

resolve the dispute over government subsidies for Boeing and Airbus, an issue that has long been a source of trans-Atlantic frictions.

 

Until now, both sides had expressed optimism that they could resolve the dispute without litigation. The aim was to do so within three months during which both sides would hold off on legal action they had brought before the WTO.

 

The Boeing-Airbus dispute centers on subsidies to the two

makers of commercial jetliners. Both sides have long claimed that the other government's payments are illegal.

 

Airbus concedes public aid reduces its financing costs, but argues it does not constitute a subsidy since it is repaid to governments with interest as well as a share of future aircraft royalties.

 

The Europeans have long argued that aid for Boeing's military contracts amounts to illegal subsidies because it supports the company's civilian operations.