EU Aid to Airbus Would Trigger WTO Case

WASHINGTON (AP) -- The United States will ask for a World Trade Organization dispute-settlement panel on aircraft subsidies if Europe moves ahead with government aid for Airbus, U.S. Deputy Trade Representative Peter Allgeier said Wednesday.

''It is up to the Europeans to decide if they are prepared to withhold launch aid while negotiating an agreement, or if they had rather take their chances in a WTO dispute proceeding,'' Allgeier told members of a House transportation subcommittee.

Allgeier repeated that the Bush administration would prefer a negotiated settlement over WTO litigation, but said the United States has a strong case against the European Union and is prepared to take WTO legal action if an agreement to end aviation subsidies becomes doubtful.

''Our preference is to negotiate a certain kind of settlement, not just any kind of settlement. And that would be one that eliminates subsidies, not just put a cap on it,'' he said.

Allgeier added that many EU members have indicated they want to continue providing subsidies for Airbus.

''If that remains the case, the chances of a negotiated settlement are not high,'' he said.

Nonetheless, WTO litigation would be a drawn-out process, Allgeier said. If the United States were to call for a dispute settlement panel at the earliest time, ''realistically, we are looking at 18 months to two years,'' he said.

In October, the United States initiated WTO consultations with the EU, alleging billions of dollars in illegal subsidies are giving Airbus an unfair trade advantage against its U.S. rival Boeing Co. The United States said it wanted to head off new subsidies in the form of $1.7 billion (euro1.35 billion) of launch aid for development of Airbus's A350 airplane.

The A350 will compete against Boeing's 787 Dreamliner, a mid-size, long range plane, which seats between 200 and 300 people and is expected to be available for delivery in 2008. The A350 won't be available until 2010.

In the past, Airbus launch aid has taken the form of low-interest loans with long grace periods, where repayment terms are contingent on the number of planes actually sold.

The EU countered by arguing that Boeing's U.S. defense contracts provide an equal subsidy benefit to any provided to Airbus, and also initiated WTO consultations. European governments were also angered when a new U.S. law that replaced an export-tax subsidy ruled illegal by the WTO didn't immediately end the tax benefit for Boeing.

Allgeier said the EU practice of providing launch aid is spreading to other countries. For example, the Canadian federal government and the province of Quebec would provide launch aid to help Bombardier develop its C-Series aircraft.

''With 110 to 135 seats, the proposed Bombardier aircraft will compete directly with Boeing and Airbus aircraft for the first time,'' he said.