Talk Of New Airbus Plane Prompted WTO Action -US Official

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Talk Of New Airbus Plane Prompted WTO Action -US Official



Wednesday October 6, 1:07 PM EDT


WASHINGTON (Dow Jones)--The U.S. filed a World Trade Organization complaint against Airbus on Wednesday because of talk that a new airplane was in the works, not because of the pending U.S. elections, a senior U.S. trade official said on a conference call.

The official, who requested anonymity, told reporters that the U.S. seeks to prevent Airbus from getting launch aid for a new passenger plane referred to as the A350. The new model would pose a direct threat to Boeing Co.'s (BA) 7E7, the U.S. company's first all-new jetliner in more than a decade.

The official said the U.S. considered action when Airbus was first developing the A380, a new superjumbo jet, but decided not to take after-the-fact actions once the launch aid had been provided. Now the U.S. hopes to avoid a similar situation.



"Once the horses are out of the barn, it's a lot more difficult," the official said.

The official rejected suggestions that the complaint might be driven by the political calendar.

"It's convenient for them to write this off as nothing more than election-year politics in the U.S.," the official said. "What's driving this is the substance."

The U.S. says it hopes the World Trade Organization actions will prompt a settlement as formal negotiations get underway. Earlier talks on the issue recently broke down, and both sides have complained that their counterpart isn't willing to pursue more fruitful negotiations.

E.U. trade commissioner Pascal Lamy said the U.S. decision to involve the WTO shows that U.S. officials "were never seriously interested in seeking to renegotiate" an existing deal struck in 1992. The U.S. pulled out of that agreement on Wednesday as it filed its complaint.

The U.S. trade official said the U.S. is committed to ending the subsidies provided to Airbus. As precedent, the U.S. is looking to an earlier case between Canada and Brazil, where the WTO struck down aircraft subsidies provided by both countries.

The U.S. official said the U.S. did not think the WTO would strike down a $3.2 billion tax break that Washington state provides to Boeing. However, if the WTO rules against the tax break as well as the development aid that Airbus receives, the U.S. would comply.

"If the net effect of the two cases going into the panel was that launch aid must end and Washington state must change its tax code, that's frankly a far better situation than the status quo," the trade official said.

The official rejected any link between the Boeing/Airbus subsidy spat and ongoing efforts to resolve a long-standing tax dispute between the U.S. and Europe. Boeing is a big beneficiary of a long-disputed U.S. export subsidy sometimes known as the foreign sales corporation provision.

Congress currently is working to find a solution to the dispute, which has dragged on for decades. European officials have suggested that they might take the aircraft subsidies issue into account when deciding how aggressively to continue sanctions permitted by the WTO.

But the U.S. trade official said the two issues are separate. "They haven't been linked up to this point and I think it would be unfair if they link it now, " the trade official said.

European officials in Washington noted the foreign sales corporation tax break in their response to Wednesday's actions. The E.U. said Boeing gets about $200 million per year because of the provision.


Roger
EWROPS

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