Europe stood its ground in a worsening transatlantic row over aircraft makers' subsidies on Monday, vowing it would not give up Airbus launch aid without concessions on support for its rival, Boeing. Washington broke off a truce between the two sides last week, accusing Brussels of reneging on the goal of eliminating state aid and trying to bring new issues to the negotiating table. A European Commission spokeswoman said Brussels was still open to further talks, but the ball was now in the US court.
"We were very surprised by the abrupt withdrawal ... taken on Friday night," said Claude Veron-Reville at the European Union executive's daily briefing. "We are willing to continue negotiations if the US clarifies their position."
The two sides last year launched competing litigation at the World Trade Organisation (WTO) but then agreed on January 11 to a 3-month negotiation drive in the hope of reaching a settlement on ending subsidies to the aviation firms.
Opting for WTO dispute settlement could put a huge strain on the Geneva-based organisation and open the door for massive trade sanctions on both sides. It could also strain US-EU ties at a time when the two need to co-operate to bring the latest round of global free trade talks to a conclusion.
The EU says that if Washington takes the matter back to the WTO, it would resume its own litigation and press on with providing launch aid for the new Airbus model, the A350.
"If either party goes back to the WTO, we are out of the negotiation process," Veron-Reville said. "The terms of the January 11 agreement are dropped ... including the commitment not to disburse any aid until April 11."
Washington went on the offensive last year because of the prospect of European subsidies for the A350, which would challenge Boeing's new 250-seat long-range jetliner, the 787.
It wants Europe to stop providing "launch aid" loans to Airbus, which have added up to some $15 billion since 1967.
Airbus, which in 2003 overtook Boeing as the world's largest manufacturer of big commercial jets, is co-owned by aerospace firm EADS and Britain's BAE Systems Plc.
Veron-Reville said the EU was not prepared to bargain away its support for Airbus without a balanced reduction of Boeing's various lines of support. "Launch aid is all we have," she said.
The EU complains that Boeing enjoys tax breaks in Washington state, its industrial homeland, and also benefits commercially from federal military and space research contracts.
The United States complained that the EU tried to add new issues into the negotiations, the first being Japan's support for production of wing and fuselage sub-assemblies there.
Brussels also brought up a problem it has with a US law, which was passed last year to comply with world trade rules over export subsidies for Boeing and other large manufacturers.
Although Congress repealed the Foreign Sales Corporation programme, it provided two years of transitional assistance for affected companies and continued exporter tax breaks for transactions that were contracted before September 17, 2003.
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