EU agrees to negotiate over aid to plane giants

Published on Tuesday 17 August 2004 12:18

THE European Union has confirmed a willingness to alter the terms of a 1992 pact with the United States that spells out how much state aid can be given to rival aircraft makers Airbus and Boeing.

But the EU’s executive body, the European Commission, has insisted that talks between the parties must focus on two issues: direct support, which it said European governments give to Airbus through loans, and indirect support, which it said the United States gives to Boeing through government contracts and tax subsidies.

On Friday, US President George Bush complained about European subsidies for Airbus and threatened to take a case to the World Trade Organisation if they were not ended.

At the time, he said: "I’ve instructed US trade representative Bob Zoellick to inform European officials in his September meeting that we think these [Airbus] subsidies are unfair and that he should pursue all options to end these subsidies - including bringing a WTO case, if need be."

Under the 1992 EU-US aircraft agreement, European governments are entitled to provided loans to cover up to 33 per cent of plane manufacturers’ research and development costs, repayable with interest within 17 years.

The agreement also allows the US to provide indirect support, through NASA or military programmes, amounting to three per cent of turnover for the entire US commercial aircraft industry.

US-based Boeing has claimed that Airbus, the world’s biggest planemaker, is receiving unjustified subsidies from European governments. Airbus, which is 20 per cent owned by BAE Systems, said it receives loans that are within the limits of the 1992 US-European agreement to gradually reduce state aid.

EC spokeswoman Amelia Torres said: "We will be prepared to check again whether the 1992 agreement is still sufficient to cover all the direct and indirect types of state aid and subsidies to both of these big aircraft manufacturers and to make changes where appropriate," "We are quite open to any discussion of this agreement."

A statement from the EC said the original agreement "contains a revision clause and the commission made suggestions to improve the agreement as early as 1997, which were at the time rejected by the US".

It added: "If the US now feels a need to review the functioning of the agreement, the European Commission is open to discussions."

Trade officials from both sides met in July to discuss the aircraft issue.

Ms Torres said another meeting was scheduled for mid-September.