Talks over aircraft subsidies stall

More than four hours of talks between the EU and the US over subsidies to Airbus Industries and Boeing ended in deadlock yesterday.

More than four hours of talks between the EU and the US over subsidies to Airbus Industries and Boeing ended in deadlock yesterday, as the two sides disagreed over calls to eliminate state support for the aviation giants.

John Veroneau, the general counsel of the Office of the US Trade Representative, said the meeting could not be described as constructive, only "useful and frank". "A constructive meeting would have been one that arrived at the goal of ending subsidies now," he added.

The sides did not agree on principles and objectives of future talks, decide how negotiations should be conducted or set any timetable. Arancha Gonzalez, a spokeswoman for the European Commissioner for trade, underlined the lack of progress, saying: "What has been agreed is that we will go back and brief our respective constituencies and then [decide] in coming weeks which course of action we should take."

The stand-off raises the likelihood of legal action at the World Trade Organisation, something already threatened by the US side. If Washington does go to the WTO, a counter-claim from the EU is certain. Mr Veroneau said: "The two options here are renegotiate or bring a WTO case," adding, "our assumption is, if we bring a WTO case, there will be some response".

Washington argues that an agreement with the EU dating from 1992 and limiting subsidies for the two aircraft manufacturers should be replaced by a new accord to forbid any support in the future. The US objects to launch aid made available as loans to Airbus, repayable if a project is successful.

But Ms Gonzalez argued that a moratorium on future launch aid would be hard to sell to Airbus when Boeing has just received "massive support" for its new 300-seat 7E7 aircraft.