Talks On Launch Subsidies Break Down

Government officials say talks between trade representatives from the US and EU have broken down -- threatening to spark again the long-running fight over subsidies to commercial airplane makers.

"Despite our best efforts, it is clear that the European Union is unwilling to eliminate launch-aid subsidies," said Deputy Secretary of State Roberk Zoellick, who was the US trade representative when the matter first came to a head last year. Even though he's moved over to State, he's still on the case. He spoke in an interview with the New York Times.

But the EU's spokesman in Washington said Zoellick's counterpart in Brussells, Peter Mandelson, "is completely surprised that such a statement should be given to the press."

There are still three weeks left to negotiate a settlement in the case of government subsidies by European governments aimed at helping Airbus launch new product lines. The dispute flared over the European aerospace giant's plan to build the A350, which would compete with Boeing's new 787 Dreamliner.

"There are clearly difficult issues at stake," EU spokesman Anthony Gooch told the Times, but Mandelson "doesn't recognize the portrayal of the state of play as offered by the U.S. side. If Mr. Zoellick is announcing that the negotiations are at an end, Mr. Mandelson has not been informed of this development."

As ANN reported last week, Washington's complaint to the World Trade Organization came after former Boeing CEO Harry Stonecipher demanded an end to launch aid given Airbus by European governments under the terms of a 1992 trade agreement. The provision allowed Airbus to take massive government loans for new projects. If the projects flopped, then Airbus didn't have to pay back the loans.

Airbus, on the other hand, accuses Boeing of soliciting -- and accepting -- subsidies from local governments in the form of tax breaks designed to lure Boeing manufacturing facilities.

In his remarks on Friday, Zoellick stopped just short of declaring the talks over. But if the two sides can't reach some sort of agreement before April 11th, the entire matter could end up in a lawsuit filed before the World Trade Organization -- the biggest dispute that body has ever faced.

FMI: www.airbus.com, www.boeing.com