WTO Intervenes in US-EU Aircraft Dispute

The WTO's member states accepted a US request to set up a panel of experts to examine its complaint against aid by the governments of four European countries -- Britain, France, Germany and Spain -- for Airbus at a meeting in Geneva, sources close to the WTO and diplomats said.

The 148 members gathered in the Geneva-based WTO's Disputes Settlement Body also accepted a similar but separate EU challenge to US state and local subsidies or indirect assistance for Boeing, they added.

Wednesday's moves, which were largely a formality, came about a month after the world's two top trade titans had blocked each other's initial attempts to seek the intervention of the WTO, the referee of global commerce.

Failed negotiations

The steps marked the failure of negotiations between Washington and Brussels to find common ground over several billion dollars of public aid, despite earlier warnings from both sides that a full-blown legal clash could be "disastrous."

"The EU regrets that the United States has chosen the path of litigation over that of negotiations," the EU's envoy said in a statement to the meeting.

Both sides appeared to leave the door open to talks.

"We remain ready and willing to negotiate such an agreement. But the EU has only been willing to reduce subsidies, not end them," a US official said in a statement to the meeting.

"Communications channels with the US remain open," the European Commission's spokesman in Geneva, Fabian Delcros, acknowledged. Negotiations were not under way at the moment, he told journalists.

Biggest-ever dispute

The aircraft dispute is regarded as one of the biggest and the most complicated that the Geneva-based trade body has ever been asked to handle, and could last for years.

The long-running transatlantic tussle reached new heights in May after Airbus requested British government aid for its future A350 long-haul plane designed to compete with Boeing's new 787 Dreamliner.

The US argues that financial aid given to Airbus by its four top paymasters to launch a whole range of new aircraft is illegal under global trade rules.

The US official said "massive amounts" of subsidies had helped Airbus gain more than half of the global market for large airliners "at the expense of its US competitors."

"And yet Airbus continues to seek and receive new subsidies. It is time for the subsidies to end," he added.

Washington is also targeting support from the European Commission, the EU's executive arm, and EU member states, as well as European Investment Bank (EIB) loans notably for Airbus's new super-jumbo A380 aircraft, according to the complaints documents filed with the WTO.

The EU has countered by charging that support from US states and local authorities for Boeing, including tax breaks and financing arrangements, are "in blatant violation of the subsidies agreement," the EU envoy said.

Transatlantic rivalry

In its complaint, Brussels is also targeting military contracts and support for space research given to US civil aircraft companies, as well as some federal support.

Both sides had consented to limited state assistance under a 1992 transatlantic accord that kept the simmering dispute between Boeing and Airbus in abeyance while competition between the world's largest aircraft makers grew.

More recent efforts to renegotiate that accord gradually became bogged down.

Washington raised the stakes by taking the initial steps for WTO action last October, at the height of the US presidential race.

The EU and US then agreed in January 2005 to shelve their action, giving themselves 90 days to seek a negotiated deal rather than face a costly legal battle. But those attempts foundered amid sometimes acrimonious exchanges between trade officials.

Rulings on the US and EU complaints are not expected before 2006, and subsequent appeals could take years to process.