WASHINGTON – The Bush administration said Monday it would bring a trade case alleging the European Union is providing illegal subsidies to Airbus (search), the major competitor to U.S.-based Boeing Co. (BA).
U.S. Trade Representative Rob Portman said the administration had decided to proceed with a case before the World Trade Organization (search) in light of preparations by member states of the European Union (search) 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 on Tuesday.
"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.
U.S. 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 new planes. Portman also said in the negotiations 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.
Earlier Monday 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.
"We are proposing that there be an immediate cut in government support on both sides and after that further cuts," said Claude Veron-Reville, Mandelson's spokeswoman.
The EU has said in the past that it would resume its WTO case against the United States if the Bush administration restarted the U.S. case.
In a joint statement issued Monday, both Portman and Mandelson pledged to keep the airplane subsidy fight from spilling over into other trade issues. The effort to complete the Doha Round of global trade talks will require close cooperation between the United States and the EU.
"We remain united in our determination that this dispute shall not affect our cooperation on wider bilateral and multilateral trade issues," the two men said. "We have worked well together so far and intend to continue to do so."
The fight over aircraft subsidies is just the latest in a string of trade battles between the United States and the European Union.
The United States has lost three high-profile cases before the WTO including one involving export tax subsidies that required Congress last fall to pass the biggest rewrite of U.S. corporate tax laws in two decades.