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The odd couple

Posted by Richard Saturday, March 19, 2005

If anyone needed any confirmation that Bush's visit to Europe last month was not going to herald a new era of cordiality in transatlantic relations, look no further than recent developments in the long-running Boeing-Airbus dispute over subsidies.

Although both sides had agreed on 11 January to pull back from invoking a fully-fledged WTO disputes procedure, in favour of bilateral talks – setting a three-month deadline for their resolution - the US last Friday decided to call off talks, accusing Brussels of refusing to negotiate in good faith.

The US complained that, although the EU had agreed to a negotiating structure for eliminating large civil aircraft subsidies, over the last two months they have been back-tracking and seeking to change the terms of that agreement.

The breakdown came late on Friday following a telephone call between EU trade commissioner Peter Mandelson and Robert Zoellick, the US deputy secretary of state.

US representatives are now saying that they will go back to the WTO to try to force an end to subsidies for Airbus unless the EU agrees to continue indefinitely a ban on new European government launch aid for the Airbus A350, a planned competitor to Boeing's long-range 787 jet.

Richard Mills, a spokesman for the US trade representative's office, says: "Despite our best efforts, it's clear the EU is unwilling to eliminate launch aid subsidies."

Initially, EU commission spokesman Anthony Gooch played a dead bat, saying that: "If Mr Zoellick is announcing that the negotiations are at an end, Mr Mandelson has not been informed of this development." He added that, while there were difficult issues, the EU trade commissioner "doesn't recognise the portrayal of the state of play as offered by the US side."

Today, however, EU spokesmen are condemning the move as "premature and unnecessary", with Mandelson expressing "regret" at the unilateral action.

The "linkages" to which the US objects include the EU's insistence on ending to tax breaks for Boeing and it trying to bring Japan into the talks, so that Tokyo's support for suppliers to Boeing's 787 will also be constrained.

An EU official is now adding fuel to the fire, denouncing the US complaints as "a completely irrational and incomprehensible response to a difficult but ordinary negotiation." In the same breath, he then called for a resumption of the talks, stating that the EU still regarded 11 April as the target date for a substantial agreement.

Some commentators are suggesting that pressing the case at the WTO would be courting "mutually assured embarrassment", as neither side has entirely clean hands in this dispute

A new chief trade negotiator for the US, Robert J Portman, a Republican congressman from Ohio will shortly take over from Robert Zoellick, but no difference in line is expected. Two men, each new to the job, will now be battling it out, an odd couple taking on a drama that seems to have no end in sight.