| EU, America in titanic clash over aircraft subsidies |
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Even as Europe is slowly coming to terms that its new constitution has been killed before it took even a small breath, it has to contend with another problem of gigantic proportions. Europe and America were deadlocked over the issue of providing subsidies for the aircraft industry. Both sides are accusing each other of violating a 1992 agreement that limits state aid to aerospace companies.
Both sides have launched legal action at the World Trade Organization over this issue. The crux of the matter is the loans that EU governments provide to Airbus as a safety net while launching a new model. America alleges that these loans are in excess to what has been agreed. Airbus which is a consortium comprising Franco-German EADS and the UK's BAE Systems, is seeking a loan of $1.7 billion in launch aid for its A350 model. This model is in direct competition with Boeing's new 787 Dreamliner.
America says that Airbus has already received $4 billion for its 550 seat A-380 model and that this new demand for another loan is illegal. Airbus counters this by saying that Boeing receives indirect aid from both Washington as well as the state of Kansas. Both sides have now asked the WTO to regulate this matter.
EU Trade Commissioner Peter Mandelson said that the EU would counter sue America over this issue at the WTO, "In order to sustain conditions for fair competition in civil aircraft production and to maintain a proper commercial balance between the two companies, the European Union is resuming action in the WTO to confirm ... the illegality of subsidies paid to Boeing. I am confident about the strength of Europe case," he said.
Richard Mills, the spokesman at the office of the United States trade representative, said, "We're not surprised. It's been clear for some time that litigation would mean two cases. We want to see an end to subsidies. That's been our consistent position. We're comfortable having the W.T.O. decide because we think we'll prevail and because that's what the W.T.O. is there for, to help settle trade disputes."
Analysts say that by approaching the WTO over this issue, both sides could find themselves in breach of international rules, which means that they could be forced to abandon the subsidies altogether.
Posted
on : Thu, 02 Jun 2005 08:25 GMT | General News
By : Salim Patel
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