Trade war over aircraft subsidies looms

12.00pm - By MICHAEL HARRISON

A full-blown trade war between the United States and Europe over aircraft subsidies moved a step closer yesterday after Washington lodged a formal complaint with the World Trade Organisation over the billions of pounds in government launch aid received by Airbus.

The European Union responded immediately by filing its own complaint with the WTO over the $23bn in subsidies which it claims the US has pumped into the rival aircraft manufacturer Boeing over the past 12 years.

The US wants to scrap a 1992 agreement governing launch aid for large commercial aircraft on the grounds that Airbus is now highly profitable and no longer needs taxpayers' support.

However, the EU counters that Boeing has and continues to receive huge subsidies in the shape of tax breaks from Washington state, where the company makes commercial airliners.

The US trade representative, Robert Zoellick said: "Since its creation 35 years ago, some Europeans have justified subsidies to Airbus as necessary to support an 'infant' industry. If that rationalisation were ever valid, its time has long passed."

The EU Trade Commissioner Pascal Lamy hit back, saying the US complaint was "obviously an attempt to divert attention from Boeing's self-inflicted decline".

M Lamy added: "If this is the path the US has chosen, we accept the challenge, not least because it is high time to put an end to massive illegal US subsidies to Boeing which damage Airbus."

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