Europe calls temporary truce in war over Airbus

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The Independent Online

The US decided yesterday against immediate escalation of the fierce transatlantic rift over subsidies to Boeing and Airbus, as Washington and the EU observed an uneasy truce after missing a key deadline to strike a deal.

The US decided yesterday against immediate escalation of the fierce transatlantic rift over subsidies to Boeing and Airbus, as Washington and the EU observed an uneasy truce after missing a key deadline to strike a deal.

US officials said there was no plan to refer the dispute to the World Trade Organisation swiftly, providing that European governments do not make available launch aid for Airbus's A350 in the meantime.

Richard Mills, the US trade representative spokesman, said yesterday: "We are reviewing the situation. We regret that it has not been possible to conclude an agreement. We continue to believe that such an agreement would be a useful solution and we remain prepared to negotiate on the basis agreed on 11 January [when the two parties launched the latest round of talks]."

For its part, the EU said it was keen to keep on negotiating, despite failing to make any significant progress in the three months since the latest round of discussions were launched.

Nevertheless Peter Mandelson, the EU Trade Commissioner, said subsidy reductions "have got to be done in an equal and balanced way".

The EU is worried that the Americans will seek to string out the talks without any real expectation of a breakthrough, to hold up the distribution of launch aid to Airbus. It refused to give any cast-iron guarantee of a continuing moratorium on start-up aid, though none is likely to be granted by member states in the very near future.

If the issue were referred to the WTO, the EU would lodge a counter-case. That would leave EU countries free to give launch aid to Airbus, pending a decision which might take two years to arrive.

While both sides sought to lower the political temperature yesterday, relations have all but broken down after a high-octane rift between Mr Mandelson and Bob Zoellick, the outgoing US Trade Representative. The two men have not spoken since 18 March when, according to the Americans, Mr Mandelson put the phone down on his interlocutor. Mr Zoellick, who was subsequently infuriated to read the Trade Commissioner's latest thinking on the dispute in an article in the Washington Post, publicly attacked Mr Mandelson for using "spin" and contrasted his approach unfavourably with that of the previous trade commissioner, Pascal Lamy.

Mr Mandelson said Mr Zoellick was confronting "difficult circumstances" but added: "I don't regard his remarks as particularly harsh or shrill."

No talks between the two men are scheduled this week and Mr Zoellick's duties as the new deputy Secretary of State were expected to take him away from Washington. But the US argues it is still on speaking terms with Mr Mandelson. European negotiators hope to be able to start a clean sheet with Mr Zoellick's designated successor, Rob Portman, but his candidature still needs to be approved by the US Senate.

The negotiations broke down after the EU put forward a two-stage approach, aiming to limit the amount of aid, then laying down rules on government repayment. Brussels argues that the US sought to exclude from a deal all subsidies received by Boeing, except those from Washington State where it is based, leaving aid from research and development untouched.

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