U.S. and EC Agree to Limit Subsidies to Aircraft Makers : Trade: The accord ends six years of sometimes rancorous talks. Each side had accused the other of government support of commercial jet manufacturers.

U.S. and European Community trade negotiators reached an agreement Wednesday that will limit their governments’ support to commercial aircraft manufacturers.

The agreement, which must be approved by Washington and the EC governments, will remove one of the blackest clouds over Atlantic trade relations and should provide a psychological boost to flagging world trade talks. It was reached after six years of sometimes rancorous talks on aircraft subsidies.

The United States had maintained that Airbus Industrie, the EC airplane manufacturing consortium, received development aid from European governments. The EC counterclaimed that U.S. makers benefited from massive government support disguised as space or military research grants.

EC negotiators believe that the United States--by agreeing to limit indirect grants to less than 5% of each company’s commercial aircraft sales--implicitly admitted that its manufacturers benefit from such support.

Although details were not released, the EC appeared to have agreed to limit its subsidies to manufacturers to 30% of aircraft development costs, sources said. Its original offer was 45%.

U.S. trade negotiator Michael Moskow said he was “very pleased” with the deal. Neither he nor other negotiators would discuss particulars.

A senior EC official said the agreement will mean a leaner and stronger aircraft industry on both sides of the Atlantic.

Airbus said the accord lifted “an important question mark on whether we could continue selling aircraft in the U.S. without paying a penalty.” The United States had threatened to impose special duties on Airbus sales if no agreement were reached.

“A trade war would have benefited nobody,” an Airbus official said.

“Judging from what we know of the agreement, it is a reasonable step forward toward leveling the playing field,” said Harold Carr, a spokesman for Seattle-based Boeing, the world’s largest commercial aircraft maker. “It’s in line with what we wanted.”

Boeing Chairman Frank Schrontz said before the announcement that the subsidy issue was one of the major problems facing his company. He said he was particularly concerned about whether Boeing could continue to offset Airbus subsidies through continuing efficiencies.

In recession-ridden 1991, $16.6 billion worth of the company’s $20.5 billion in announced orders came from foreign airlines, making Boeing one of the country’s biggest earners of foreign exchange.

In 1990, before the recession hit, $32 billion worth of the $47.7 billion in announced orders was foreign.

Although much of the initial U.S. reaction was positive, there were fears that conflict over interpretation of the accord may lead to new trade disputes, particularly in the sensitive area of indirect subsidies and government inducements to help sell aircraft.

Industry officials said fierce competition in a weak aircraft market is expected to keep the issue on the front burner.