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US, EU signal a truce in trade war

In conciliatory climate, rivals agree to try to end Airbus, Boeing subsidies

BRUSSELS -- Highlighting a conciliatory mood since President Bush was reelected, the United States and the European Union agreed yesterday to try to amicably settle the decades-old trade dispute over billions of dollars in subsidies to aircraft makers Airbus and Boeing.

The decision to defer pursuing complaints with the World Trade Organization while the governments negotiate a settlement was in sharp contrast to the campaign rhetoric in October, when Bush challenged the 25-nation EU before the world trade body and the EU threatened to retaliate.

''We need open warfare on this issue like we need a hole in the head," said EU Trade Commissioner Peter Mandelson.

Apart from holding off on legal action at the WTO, both sides agreed to stop subsidizing the world's two biggest aircraft makers during the three-month talks. Both companies have said the funding halt would not affect operations.

''For the first time in this long-standing dispute, the US and the EU have agreed that the goal should be to end subsidies," US Trade Representative Robert Zoellick said.

After deep rifts caused by disagreements over the war in Iraq, Bush has indicated he wants to mend fences with Europe and will visit the EU head office in Brussels on Feb. 22.

''If we had embarked on this contest at the WTO it might have cast a cloud, or at least a pall, over the president's visit," Mandelson said.

A senior US trade official, who spoke on condition of anonymity, said the Bush administration would still be prepared to go ahead with a WTO case if the negotiations do not produce a satisfactory settlement to end subsidies.

Airbus, which has said it plans to apply for government support to develop its new mid-sized, long-haul A350, which is the company's answer to Boeing's planned 7E7 Dreamliner, declined to comment on the deal.

Boeing president and chief executive Harry Stonecipher called the agreement an important step ''to establish much-needed balance in the commercial aircraft market."

The European Commission said EU and US trade negotiators would try to ''eliminate different types of subsidies and to establish fair market-based competition" between the two aircraft manufacturers.

Mandelson said both sides could extend the deadline for talks but insisted he wanted the negotiations done quickly and efficiently.

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