Transatlantic Aircraft Subsidy Talks Stall Over Definitions

Strategic Insights -

European Union Trade Commissioner Peter Mandelson is scheduled to meet with his US counterparts in Washington on Thursday and Friday to discuss the stalled negotiations over aircraft subsidies. The EU claims the US gives unfair subsidies to Boeing, while the US accuses Airbus of receiving similar benefits. Despite Mandelson's desire to reach an agreement before US President George W. Bush's visit to Brussels on February 22, US negotiators have expressed skepticism about an early settlement. The two sides are struggling to define subsidies and agree on what is permitted or banned, with EU officials acknowledging that an early agreement is unlikely.

Key Takeaways:

  • The transatlantic talks over aircraft subsidies have stalled due to disagreements over definitions and the pace of negotiations.
  • EU Trade Commissioner Peter Mandelson hopes to meet with his US counterpart, Robert Zoellick's successor, to discuss the negotiations.
  • The EU and US have started drawing up black, white, and gray lists of government aid to discuss during the talks.
  • The negotiations began in January, after the two sides agreed to avoid taking a trade case to the World Trade Organization.
  • The EU fears that the US will extend the talks to allow Boeing to launch its new 787 Dreamliner, while the Europeans fear they will not be able to help Airbus launch the A350 competitor.
  • Airbus could thrive without launch aid loans, but other types of state help may still be offered.
  • Some European officials believe the US aims to prevent Airbus from developing the A350, but this strategy will likely fail.

Statistics:

  • The US and EU agreed to intensive negotiations on eliminating subsidies to aircraft makers in January.
  • The talks began with a three-month deadline, which may be extended if no agreement is reached.
  • The EU has agreed to forgo guaranteed launch aid loans as long as the talks continue.
  • Airbus could receive implicit government support even if launch aid is forbidden.
  • The Office of the U.S. Trade Representative declined to comment on the specifics of the negotiations.

Sources:

  • "E.U. Trade Commissioner Seeks Settlement on Aircraft Subsidies" (February 9, 2005) Dow Jones News (http://www.dowjones.com)
  • "U.S. and E.U. Agree to Avoid WTO Case Over Aircraft Subsidies" (January 2005) COMTEX (http://www.comtexnews.com)