Europe

Airbus Loan Fuels EU-US Dispute


US officials have criticised a UK decision to lend money to European aircraft manufacturer Airbus on the eve of a World Trade Organisation (WTO) ruling about aircraft subsidies.

"The commitment of launch aid, or any other form of preferential financing, by any of the EU member states would be a major step in the wrong direction," the Office of the United States Trade Representative said on Friday (14 August).

"We want to resolve the problem of WTO-inconsistent aircraft subsidies, but the commitment of additional support would make that even harder."

The statement came after the UK earlier the same day unveiled a £340 million (€396 million) loan to help the European company build wings for its new A350 model at two British plants.

France and Germany have already pledged €2.5 billion for the €11 billion project. Spain is expected to loan around €400 million.

The US and EU in 1992 signed an Agreement on Trade in Large Civil Aircraft which permits either side to lend up to a third of the development costs for new planes.

But the pair have been locked in a bitter legal battle for the past five years, with the US accusing the EU of giving $200 billion (€141 billion) in illegal aid to Airbus and the EU saying the US has paid $24 billion in illicit subsidies to Boeing (BA).

The WTO is set to deliver a preliminary decision on the US complaint in early September in what analysts fear could trigger a wider EU-US trade dispute.

"It is disappointing that Airbus member states should proceed with financing for the new A350 on the very eve of this ruling," Boeing spokesman Charlie Miller said in the Wall Street Journal. "Airbus has no need for cash from taxpayers. It should finance the A350 on its own."

British business minister and former EU trade commissioner Peter Mandelson defended the UK decision on Friday.

"This is neither a bail-out nor a subsidy. We're not sinking money from which we'll never see a return. This is a first-rate investment in British engineering expertise," he told the UK press. "We know about subsidies ...you only have to go to the United States to see the sort of subsidies that are provided to Boeing."

The A350—a medium-sized, long-range craft—is scheduled to start flying in mid-2013 and to compete with Boeing's 787 Dreamliner and 777 planes.

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