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US takes on EU over Airbus

White House says subsidies spurred filing of trade case

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

US Trade Representative Rob Portman said the administration had decided to proceed with a case before the World Trade Organization in light of preparations by member states of the European Union to commit $1.7 billion in new launch aid to Airbus.

''The EU's insistence on moving forward with new launch aid is forcing our hand," Portman said in a statement announcing the administration's decision.

Launch aid is the support provided when a new airplane model is developed.

Both sides argue that the other is providing WTO-illegal subsidies to support a domestic airplane manufacturing industry.

Portman said the formal request to establish a WTO hearing panel in the dispute would be filed with the Geneva-based WTO today.

''We continue to prefer a negotiated settlement and we would rather not have to go back to the WTO," Portman said. ''By requesting the panel, the United States is providing time for the EU to reconsider its plans to provide new subsidies."

The announcement that the United States would file a case against the EU was the latest twist in the extended dispute over whether the world's two biggest aircraft manufacturers were receiving improper support from their governments.

In January, both sides had agreed to put WTO cases they had filed against each other on hold in an effort to seek a negotiated settlement during a 90-day period.

However, those talks went nowhere as both sides seemed to become entrenched in their positions.

US officials accused the EU of not being serious about the talks, while EU Trade Commissioner Peter Mandelson said that the Bush administration had no room to reach a negotiated settlement because of heavy political lobbying by Boeing.

Portman said the administration's hand was forced because the EU is no longer willing to hold off on providing further government support to Airbus as it develops planes. Portman also said in the negotiations that the EU has only proposed to reduce government subsidies, not end them as the United States is seeking.

''We still believe that a bilateral negotiated solution is possible, but the negotiations won't succeed unless the EU recommits to ending subsidies," Portman said.

Boeing spokesman Russ Young said the company strongly supported the trade representative's decision but hoped for a settlement.

''We agree with the USTR that a negotiated settlement is preferable and hope serious US/EU discussions will continue as litigation proceeds," he said. ''The company stands ready to support the USTR in any way necessary to bring a prompt end to market-distorting subsidies to Airbus."

Earlier yesterday in Brussels, the EU announced that it had made a new offer to the United States to cut government aid. Officials said that Mandelson had conveyed the offer by telephone to Portman on Friday.

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