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EU sees Boeing-Airbus row running into 2009

STRASBOURG, France - A major transatlantic row over subsidies paid to Boeing Co of the United States and rival European planemaker Airbus could drag into 2009, the European Commission said on Tuesday.

“Only a few weeks ago, Boeing publicly rejected Airbus’ latest olive branch,” the European Union executive said in a statement to the European Parliament, drawn up by European Trade Commissioner Peter Mandelson.

“We are therefore sceptical whether this dispute can be resolved at the negotiating table any time soon,” it said, adding a settlement remained the EU’s favored option.

In the biggest trade dispute ever filed at the World Trade Organization, the United States and the EU three years ago swapped complaints over tens of billions of euros and dollars in government support for each other’s aircraft industries.

In Washington, a spokeswoman for the US Trade Representative’s office said the United States also preferred a negotiated settlement but was prepared to fight on.

“We continue to believe that a negotiated settlement that brings an end to WTO-inconsistent subsidies would be best. Meanwhile, we remain confident in a favorable outcome through litigation,” USTR spokeswoman Gretchen Hamel said.

Tim Neale, a spokesman for Boeing, took issue with the commission’s statement that Boeing had rejected an Airbus proposal for resolving the dispute.

“We are not aware of any EC or Airbus offers to resolve this dispute that would address the most market-distorting subsidies, namely launch aid,” Neale said in a statement.

“Continuing launch aid is the biggest impediment to a ’fair and balanced’ resolution of the dispute.”

The commission said the WTO was likely to decide on the cases in 2008 but appeals could stretch the process into 2009.

“We would think that once the WTO will have decided in the two cases, it would make sense to sit together with the US to manage the resulting implications. Whether this might expand into proper negotiations, we are not sure,” the statement said.

Although Boeing was waging a “damaging” campaign, including an attempt to block funds for improving US airports to accommodate Airbus’s new superjumbo A380, the commission said that so far the row had not damaged EU-US trade relations.

“We intend to keep it that way. And we trust that the US will do the same, for example by ensuring that the Airbus-Boeing disputes are not allowed to affect either company’s ability to compete fairly in public procurement competitions,” it said.

“Notably, there should be no anti-competitive actions in legislation or executive policy that would improperly restrict the ability of EU companies to compete in the current US aerial tanker recapitalization program.”

Boeing is competing against Northrop Grumman Corp and its partner EADS, the parent company of Airbus, to build a new fleet of mid-air refueling airplanes in a $40 billion Air Force competition.

“Boeing has welcomed the competition Airbus and Northrop have brought to the tanker program. Competition makes everyone stronger,” Neale said.