US in bid to halt Airbus handouts

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US government officials are putting pressure on their European counterparts to cut multi-billion dollar subsidies to Airbus, the European plane-maker.

The dispute is the latest in a long line of transatlantic trade spats in which both trading partners have wrangled over goods ranging from steel to genetically modified crops.

Patty Murray, the Democrat senator from Washington State - home of Airbus's main rival - said that the US is increasing its efforts to have these subsidies dropped now that the European company has pulled ahead of Boeing as the world's biggest commercial aircraft maker.

"There are ongoing discussions at the highest level of government on this issue and there are talks at a senior level between US and European officials," she said. "Everybody is looking at this and, for the first time, we are making some progress."

Her comments come days after Boeing's chief executive, Harry Stonecipher, called for European aid to be stopped.

Senator Murray, who hit out against European subsidies in a speech to the Senate in May, has accused Airbus of "taking over America's aerospace industry through aggressive, unfair market-distorting measures".

US Trade Representative officials refused to comment on the issue. Negotiations between the US and Europe are likely to focus on reforming a 1992 agreement on subsidies to the aviation industry. Boeing maintains that this deal is now outdated given Airbus's leading position in the market. Boeing has also said it doesn't favour having the matter settled by the World Trade Organisation.

"We hope it wouldn't have to go to a trade dispute. We're not interested in a dispute and I doubt that Airbus is either," said a Boeing spokesman. "But that doesn't mean that we won't take action. We want to see current practices end." Critics say one reason why the US company is keen to keep the issue away from the WTO is because it gets its own share of government help. Nick Van den Brul, an aviation analyst at Exane BNP Paribas said: "Boeing gets indirect subsidies via their defence business which allows them to cross-fertilise."

Furthermore, a study by David Pritchard and Alan MacPherson at the State University of New York says Boeing will receive around $3.7bn (£2bn) in tax breaks from the state of Washington over the next 20 years for the assembly of its new 7E7 Dreamliner plane, incentives which the authors say are "in clear violation of WTO rules".

A Boeing spokesman in Washington DC said these tax breaks were available to other companies and that this support did not translate into money flowing into Boeing's coffers.

Airbus won't reveal the total size of loans with European governments, although it confirmed that governments were lending 33 per cent of the $10.7bn development costs of its A380 jumbo jet.