The European Union and the United States agreed today to defer pursuing complaints with the World Trade Organization while they attempt to settle their dispute over subsidies to Airbus...

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BRUSSELS, Belgium – The European Union and the United States agreed today to defer pursuing complaints with the World Trade Organization while they attempt to settle their dispute over subsidies to Airbus and Boeing through bilateral talks.

The two sides also agreed to refrain from giving new aid – for large civil aircraft development or production – to Toulouse, France-based Airbus SAS and Chicago-based Boeing during the talks.

“For the first time in this long-standing dispute, the U.S. and the EU have agreed that the goal should be to end subsidies,” U.S. Trade Representative Robert Zoellick said.

Boeing President and Chief Executive Officer Harry Stonecipher called the agreement an important step “to establish much-needed balance in the commercial aircraft market.”

“Boeing is encouraged by the good faith displayed by both governments, as evidenced by their understanding not to provide additional development and production support and to refrain from pursuing WTO litigation during the time they are negotiating,” Stonecipher said in a statement.

The European Commission said the EU and Washington “confirmed their willingness to resolve the dispute which has arisen between them over trade in large civil aircraft, and to devote time and resources to doing so by negotiation rather than pursuing the dispute through WTO panels.”

The European Commission said EU and U.S. trade negotiators would hold three months of talks to try to “eliminate different types of subsidies and to establish fair market-based competition” between the two giant aircraft manufacturers.

The talks will specifically try to reduce subsidies and come up with a list of approved aid the aircraft makers can still receive.

Tuesday’s deal does not touch current aid programs to the two companies.

Billions of dollars given to Airbus’s development and launch of its A380, 555-seat superjumbo will not be renegotiated.

Hiddo Houben, an aide to EU Trade Commissioner Peter Mandelson, said the three-month aid suspension agreed on Tuesday would prevent European governments committing any launch aid to the new Airbus A350, which is the company’s answer to Boeing’s planned 7E7 Dreamliner.

Whether Airbus could receive launch aid after that period would depend on the terms of any agreement reached, but Houben said the intention on both sides was to eliminate all forms of subsidies.

Airbus, which has said it plans to apply for government support to develop its new mid-sized, long-haul jet, declined to comment on the breakthrough deal between Brussels and Washington.

However, Airbus has repeatedly said its cash flow is strong enough to fund its own development costs, including those of the A350.

WTO Director-General Supachai Panitchpakdi welcomed the decision on the talks. “I commend both parties in choosing the path of commercial diplomacy rather than conflict,” he said in Geneva.

According to the text of the agreement, the deal “will be enforced through transparency and strong dispute settlement procedures.”

The announcement comes after days of intensive talks, EU officials said, and averted a clash at the WTO in Geneva that could have ruled against both sides for possibly distorting competition in an already cutthroat market.

Last October, Washington threatened to launch a lawsuit at the WTO in Geneva over subsidies to Airbus. Mandelson, the EU’s new trade commissioner, has said the EU would file a countersuit about alleged subsidies given to Boeing.

The new talks will try to renegotiate a 1992 accord that foresaw a gradual reduction in subsidies for aircraft makers.

Washington has argued for a renegotiation, saying Airbus now grabs more than 50 percent of global orders for passenger planes and no longer needs public help.

If a deal on cutting subsidies is reached, the EU and the United States will try to “broaden the agreement” including other countries with civil aircraft industries, the EU said.

Both Washington and Brussels had threatened to file their complaints ahead of a dispute panel deadline Jan. 13.

Boeing shares were down 22 cents at $50.76 in late morning trading on the New York Stock Exchange. Its shares peaked at a 52-week high of $55.48 in November.