U.S. - EU not ready to give up key launch aid in Airbus spat

BRUSSELS, Belgium -- The European Union is not serious enough about negotiations over aircraft subsidies and is leaving Washington with few choices other than taking the dispute to the World Trade Organization, U.S. deputy secretary of state Robert Zoellick said Monday.

Zoellick, the former U.S. trade representative, said there was no will on the European side to cut government aid that helps Airbus launch new aircraft models.

"We made clear we needed to eliminate the subsidies as defined by the WTO," Zoellick said after talks with EU external relations commissioner Benita Ferrero-Waldner, which also touched on Iran, Iraq and the possible lifting of the Chinese arms embargo by the EU.

The two sides agreed in January to hold talks on their long-standing dispute over subsidies to European plane maker Airbus and Chicago-based Boeing Co.

"Frankly it was never my view that it took that much time to implement it (the subsidy cuts)," said Zoellick, who continues to represent the United States in the talks. "It's just a question of political will."

Ferrero-Waldner, who relayed a message from EU Trade Commissioner Peter Mandelson, who was on a trip to the Middle East, said the EU was still serious about reaching an agreement to cut subsidies to both aircraft makers.

"He would like still to have this two-phase approach until the 11th of April, but let's see how things evolve," she said.

Mandelson and Zoellick agreed in February to get a partial deal, lifting some sanctions by April 11, while working for a comprehensive agreement after that date.

Zoellick, though, said statements by various EU governments and Airbus itself suggested that they "may not be comfortable moving to the elimination of launch aid, even after we made our agreement in January."

"I noticed that the Airbus representatives were out almost the next day saying they wanted to proceed with launch aid," he said.

Mandelson acknowledged last week in a letter published in the Washington Post that the talks have "pretty much broken down," but said a deal could still be reached by the April deadline, on a first phase of cuts to aid for the two aircraft makers.

Last month, the EU head office demanded clarification on whether Washington was still interested in the talks after U.S. officials said they may reinstate a formal complaint at the WTO because the EU refuses to budge on dropping launch aid.

Zoellick said the United States was "willing to continue" talks.

Both have accused each other of trying to renege on their Jan. 11 pledge to resolve the trade spat. The pledge was seen at the time as symbolic of U.S. President George W. Bush's attempts to mend relations with European leaders.

U.S. officials said that during the talks the EU had been trying to backtrack on a commitment to cut subsidies, especially related to aid given to Airbus to launch new aircraft models. They said the EU was trying to stall until the U.S. Congress approves the nominee to succeed Zoellick as trade representative, Rob Portman, a Republican congressman from Ohio.

Shares of Boeing fell 65 cents, or 1.1 percent, to $58.13 in midday trading Monday on the New York Stock Exchange, near the high end of a 52-week range of $39.60 to $59.12.