Airbus Strikes Back at Boeing

Airbus reacted forcefully Thursday to a US complaint filed with the World Trade Organization this week over European state aid for the European aircraft manufacturer, saying Washington's move underscored rival Boeing's dependence on "WTO-incompatible subsidies".

"The path chosen by the US government underscores our belief that the 7E7 program is only viable because of the WTO-inconsistent subsidies granted to it - subsidies which were already prohibited by the 1992 Agreement," Airbus said in a statement.

Earlier in the day, the WTO confirmed that the United States had triggered the global trade body's disputes settlement procedure by asking for formal consultations with the European Union over EU subsidies paid to Airbus. The two parties now have 60 days to start negotiations to find a solution to the dispute on their own, a WTO spokesman said.

Under international trade rules, if they fail to find a negotiated settlement, the WTO will then appoint an independent panel of experts at the request of the US to examine and rule on the complaint.

US takes a hard line

US Trade Representative Robert Zoellick said the United States had been trying to convince the European Commission to halt billions of dollars in "unfair subsidies" to Airbus. "But the EU and Airbus appear to want to buy more time for more subsidies for more planes," he said in a statement.

"That isn't fair and it violates international trade rules. Since we could not agree, the United States decided to pursue resolution through the agreed procedures of the multilateral trading system, by bringing a WTO case before an international dispute resolution panel."

EU strikes back

The European Union responded to the US action by launching a counterattack, taking its own complaint about rival Boeing to the WTO in the brewing aviation trade war.

Attacking the US complaint with the WTO, EU Trade Commissioner Pascal Lamy said in a statement: "If this is the path the US has chosen, we accept the challenge, not least because it is high time to put an end to massive illegal US subsidies to Boeing which damage Airbus, in particular those for Boeings new 7E7 program."

The complaints followed a failure to renegotiate a 12-year-old transatlantic accord limiting government support to airplane manufacturers. Subsidies had been allowed under a 1992 US-EU agreement which the United States decided to scrap.

Competition heats-up

Competition between Boeing and Airbus has become intense in recent years as the European group increased its share of the market for passenger aircraft.

"The market will now draw its own conclusions on the viability of the 7E7, a program which depends vitally on WTO-incompatible subsidies," Airbus said in its statement.

Boeing's next generation fuel-efficient mid-sized 7E7 Dreamliner jet, holding 200 to 300 passengers, is a key project in Boeing's struggle with Airbus in the civilian aircraft sector. Boeing has forecast a need for 2,000-3,000 airplanes in the 7E7 market segment over the next 20 years.