US to sue EU over Airbus subsidies

The Bush administration will bring a trade case alleging the European Union is providing illegal subsidies to Airbus, the major competitor to US-based Boeing Co.

    US says EU subsidies to Airbus hurt its own Boeing

    Stung by the move, the EU on Monday voiced its regret, but stopped short of announcing a resumption of its case against Boeing.

    "This is a disappointing move by the United States, given the proposals for a negotiated solution the EU side made on Friday," European Commission spokeswoman Claude Veron-Reville said in a statement.

    "The EU will make its own position known tomorrow."

    The United States, seeking to defend Boeing, said it would reactivate its World Trade Organisation (WTO) case against billions of dollars in subsidies for Airbus given by EU governments.

    EU rebuffed

    The US move came after the EU made a new offer to cut government aid to Airbus in a bid to resolve the simmering dispute.

    Chicago-based Boeing competes
    with Airbus in the global market

    But the reaction from Washington - that the EU was spinning the press - highlighted the complexity and sensitivity of the dispute.

    EU Trade Commissioner Peter Mandelson phoned US Trade Representative Robert Portman on Friday to propose that both sides cut part of their subsidies immediately and discuss further aid cuts later.

    "We are proposing that there be an immediate cut in government support on both sides, and after that further cuts," Veron-Reville said.

    The dispute centres on aid or subsidies to the world's two biggest aircraft makers and how it reportedly distorts the world market for planes. Both sides claim they unfairly suffer commercial damage.

    Airbus spokesman David Velupillai refused to comment on the latest offer, saying it was a matter for Brussels and Washington to sort out.

    Russ Young, a spokesman for Chicago-based Boeing, echoed that sentiment. "It’s not within our purview," he said.

    "That's the job of the two governments, to work out an agreement. We continue to support the US government's willingness to take the necessary steps to end subsidies to Airbus, including WTO litigation, if necessary."

    Commericial uncertainty
     
    The EU has warned that taking legal action at the WTO risked prolonged trans-Atlantic political tensions and commercial uncertainty for both companies, and has pledged to take
    similar action against aid given to Boeing Co.

    "We are proposing that there be an immediate cut in government support on both sides, and after that further cuts"

    Claude Veron-Reville,
    EU spokeswoman

    Despite the threat of legal action, Airbus is shortly expected to seek around $1.5 billion in investment from European governments to support the launch of its new A350 model, which is projected to enter service in 2010.

    The EU says Boeing receives similar launch aid, pointing at the recent $1.6 billion granted by Japan to build the wings for Boeing's new 787. The EU also claims government support to Airbus is outweighed by US backing to Boeing through tax breaks, investment subsides and support from Nasa and the Pentagon.

    SOURCE: Agencies


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