EU Trade Commissioner Warns of Airbus Subsidies Cut

Strategic Insights -

European Union Trade Commissioner Peter Mandelson has hinted that his side may be prepared to negotiate a settlement with the US over government aid to Airbus and Boeing, provided European government funding adapts to the outcome of the negotiations. The warning underscores the EU's desire to restart talks with Washington, despite a looming WTO case that could see the two sides locked in protracted litigation. As the global trade referee begins examining the books of both companies in search of subsidies, the prospect of a negotiated solution has raised hopes of avoiding a damaging and potentially costly WTO decision.

Key Takeaways:

  • The EU's Trade Commissioner, Peter Mandelson, has signaled a willingness to negotiate a settlement with the US over government aid to Airbus and Boeing.
  • Mandelson emphasized that European government funding will have to adapt to the outcome of any negotiations, potentially leading to cuts in subsidies to Airbus.
  • The WTO has appointed a senior Mexican trade official, Mateo Diego-Fernandez, to examine the books of both companies and determine whether they have received unfair subsidies.
  • A previous attempt to negotiate a solution ended in acrimony early this year, but both sides remain open to restarting talks.
  • The EU's countersuit claims that Boeing benefits from huge US government subsidies, while the US charges that Airbus has used billions of euros in unfair subsidies to gain an advantage in the global market.
  • The US has expressed frustration with the EU's delay in allowing the WTO case to proceed, but both sides must agree on how to make company and government records available to each other before arbitrators can begin work.
  • The dispute is the highest-profile case in the WTO's 10-year history and is likely to be its most costly.
  • Mandelson also accused the US of "going in the wrong direction" on farm support, criticizing the American farm bill's upward trend in subsidies despite European agricultural reforms.

Statistics:

  • The WTO case against Airbus and Boeing is set to be the largest and most costly in the organization's history.
  • The US has been pushing for the EU to reduce customs duties, while the EU is urging the US to reduce support for farmers.
  • The European Union has overhauled its Common Agricultural Policy, with agricultural spending in Europe still higher than in the US.
  • The US and EU are under pressure to reach a framework agreement for a new global trade deal by December, a deadline that is already precarious given the disagreements over farm support and the slowdown in negotiations.

Sources:

  • European Union Trade Commissioner Peter Mandelson
  • World Trade Organization (WTO) dispute case
  • The Associated Press (AP)
  • Statement of the United States before the WTO dispute panel on July [no specific date provided]
  • European Union Common Agricultural Policy reforms
  • US farm bill and agricultural subsidies