Brussels, 07/10/2004 (Agence Europe) - On Thursday at noon, Commissioner Lamy's spokesperson , Arancha Gonzalez declared to the press, in response to questions regarding the Trans-Atlantic trade dispute on subsidies to the aeronautical sector, that things should not be blown out of proportion (EUROPE yesterday p 13). She indicated that they were at a consultation stage and that perhaps they would still manage to convince their US colleagues that the EU had respected the rules. In other words the EU is optimistic and hope that a new trade war with Washington can be avoided.
On Wednesday the EU had requested consultation with the USA at the WTO on the "massive subsidies" to Boeing, an approach in response to proceedings begun a few hours earlier by Washington on European aid to Airbus. Overall the USA believes that "subsidies" given to the European consortium are no longer justified. Brussels in sticking to the bilateral EU/US agreement of 1992 on aid to the aeronautical industry and has asserted that the EU has always respected this agreement to the letter and that the claimed subsidies were in reality, loans to be paid back with interest. Ms Gonzalez indicated that since 1992 they had kept the USA informed of all the repayable loans to Airbus and that they had always made sure that they would remain within the ceiling agreed each year in the agreement. On the other hand, the spokesperson indicated that for the most recent Boeing model (7E7: Editor's note), US aid was in contravention of the rules of the 1992 agreement. The EU considers that the US Government has subsidised Boeing, mainly by paying research and development costs through NASA, the Department of Defence, the Department of Commerce and other government agencies. Since 1992 Boeing has received around $ 23 billion in US subsidies. Moreover, the US Government continues to grant Boeing around USD 200 million per year in export subsidies under the Extraterritorial Income Exclusion Act (the successor to the “FSC” - Foreign Sales Corporations legislation), despite a WTO ruling expressly declaring these subsidies illegal. According to the Commission the latest and most flagrant violation consists in massive subsidies of about US $ 3.2 billion, inter alia in the form of tax reductions and exemptions and infrastructure support for the development and production of Boeing's 7E7. In a press statement published on 6 October the Commission highlights "the evidence the European Commission has collected over the years clearly demonstrates that the above subsidies violate the WTO Agreement on Subsidies and Countervailing Measures" and that they also violate the 1992 EU-US Agreement on Trade in Large Civil Aircraft which regulates precisely the forms and level of government support the US and the EU provide to Boeing and Airbus respectively.
The Commission has also criticised the fact that despite its "repeated invitations", the US has declined to participate in the bilateral consultations stipulated by the 1992 Agreement for more than two years.
Nonetheless, further to a US request only a few weeks ago, the Commission agreed to discuss the question of a possible revision of the 1992 Agreement provided that this would cover all forms of subsidies including those used in the US, and that the US would bring any subsidies for the Boeing 7E7 into conformity with the 1992 Agreement. Finally, and just when these discussions were taking place (most recently in a constructive meeting on 16 September), the US requested WTO consultations on European support to Airbus. This suggests "that the US request for re-negotiation of the 1992 Agreement was never particularly serious".