Subsidy Case to Go to WTO, U.S. Says

The Bush administration said Monday that it would bring a trade case alleging the European Union is providing illegal subsidies to Airbus, the major competitor to Boeing Co.

U.S. Trade Representative Rob Portman said the administration had decided to proceed with a case before the World Trade Organization in light of preparations by European Union members to commit $1.7 billion in new 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.

Both sides argue that the other is providing subsidies to support a domestic airplane manufacturing industry, which is illegal under WTO rules.

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 U.S. 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 Chicago-based Boeing.