US Seeks Arbitration Over Airbus Subsidies

"The United States announced Monday that it will file a request for the establishment of a World Trade Organization (WTO) dispute settlement panel to resolve the dispute. The panel request will be filed on Tuesday, May 31," the USTR statement said.

The US complaint was announced here as a spokeswoman for European Union trade chief Peter Mandelson (photo) said Monday that Mandelson had written to his US counterparts with a fresh proposal to resolve the transatlantic row over subsidies for airplane makers Airbus and Boeing.

Illegal aid

The simmering dispute over aid to Airbus and Boeing has become inflamed lately after Airbus requested British government aid for its A350 long-haul plane designed to compete with Boeing's plans to launch the 787 Dreamliner.

The United States believes financial aid given to Airbus to launch new aircraft is illegal, while the Europeans accuse Washington of subsidizing Boeing through military contracts.

"For almost a year, the United States has tried to convince the EU to negotiate an end to subsidies for large civil aircraft," US Trade Representative Rob Portman said in the statement. "So we were pleased when, on Jan. 11 of this year, the EU agreed to a standstill on launch aid while we negotiated an end to subsidies. Unfortunately, at this point, the EU is no longer willing to hold off on launch aid, and has only proposed to reduce subsidies, not end them."

A balanced approach

Meanwhile, in Brussels, Mandelson's spokeswoman Claude Veron-Reville said earlier Monday that the EU trade chief's proposal renews a call for a balanced approach to the dispute.

"Peter Mandelson is making it clear what we are ready to do and this is why he has made a fresh proposal," she said. "He has repeated our proposal and that we are willing to negotiate rather than go the WTO."

The USTR said that by requesting the arbitration panel, Washington is providing time for the EU to reconsider its plans to provide new subsidies and recommit to the deal struck in January.

"This would include an immediate halt to any further steps toward providing new launch aid and a recommitment that the purpose of the negotiations is to end new subsidies for Large Civil Aircraft (LCA), and not merely to reduce them," the USTR said.

"We still believe that a bilateral negotiated solution is possible," Portman said, noting that out of the 100 concluded WTO cases involving the US since the WTO was founded, over a third were satisfactorily resolved following negotiation. "But the negotiations won't succeed unless the EU recommits to ending subsidies."

Months of negotiation

The EU and the US have been trying for months to negotiate an agreement to end their dispute over commercial aviation, to avoid taking the case down the perilous WTO route.

Washington insists that over its 35-year history, Airbus has benefited from massive amounts of member state and EU subsidies that have enabled the company to create a full product line of aircraft and gain a 50-percent share of large civilian aircraft sales and a 60 percent share of the global order book.

Every major Airbus aircraft model, they argue, was financed, in whole or in part, with EU government subsidies taking the form of "launch aid" - financing with no or low rates of interest, and repayment tied to sales of the aircraft.