A months-long escalating fight over subsidies to aircraft giants Boeing and Airbus came to a head this week after the US and the EU filed suit against each other with the World Trade Organization.
The EU is resuming action at the WTO against the United States in a dispute over subsides to Airbus and Boeing, EU trade chief Peter Mandelson said Tuesday, adding he was "confident" of the bloc's case.
"We in Europe were still seeking to negotiate an agreed solution, while the US was planning last week to take this issue to the WTO," he told Reuters. "This decision is highly regrettable for those that think the WTO has better things to do with its time than referee a grudge fight."
US didn't act in good faith, he says
The move pits Washington and Brussels squarely against each other in a months-long dispute that escalated after an April 11 deadline passed without a resolution. On Monday, the US filed suit against Airbus and now, the European countermove, raises the stakes in the transatlantic dispute over state aid for aircraft giants Boeing and Airbus.
The WTO's 148 members can face huge penalties if they are found to have breached the rules of global commerce and then fail to fall into line with its decisions.
The WTO said it received Washington's complaint on Tuesday and that an initial hearing was scheduled for June 13 to set up a dispute settlement panel.
The panel could take until 2006 to rule on the dispute, and with possible appeals by either side, a final decision may come even later.
EU disappointed with US move
After a visit to the WTO's Geneva headquarters on Tuesday, EU Trade Commissioner Peter Mandelson said he was disappointed by the US move against Airbus, which has overtaken Boeing to lead the global civilian aircraft market.
"Airbus's success is well earned," Mandelson told AFP. "It's won through hard work, high technology and huge creativity, not by subsidies as Boeing would like to pretend. This decision is highly regrettable from the standpoint of all those who believe that the WTO has better things to do with its time than referee this grudge fight of Boeing against Airbus."
The EU and US first filed requests for consultations at the WTO in October -- the formal opening shot in the WTO's dispute procedures -- but later agreed to freeze the process as they tried to reach a settlement.
Washington's WTO complaint was announced shortly after Mandelson had made a fresh proposal to resolve the dispute by trimming state aid to both companies.
Number two now
EU promised subsidies reduction
On Tuesday, Mandelson hinted that he believed the US had acted in bad faith.
"I think it is as well for the world to know that we in Europe were still seeking to negotiate an agreed solution while the United States was planning to take this matter to the WTO," he said.
On Monday, US Trade Representative Rob Portman said in a statement, however, that Washington was unhappy because the EU had "only proposed to reduce subsidies, not end them," thereby not tackling US concerns head on and forcing Washington's hand.
"We still believe that a bilateral negotiated solution is possible," he said. "But the negotiations won't succeed unless the EU recommits to ending subsidies."
Washington had decided to take the case to the WTO because that was the best way to prevent the aircraft dispute from spilling over into other tussles on steel duties and biotechnology, Portman's office said.
On Monday, after Washington's announcement, Mandelson and Portman had issued a joint statement.
Dispute will not affect other areas of cooperation
"We remain united in our determination that this dispute shall not affect our cooperation on wider bilateral and multilateral trade issues," they said. "We have worked together well so far, and intend to continue to do so."
The dispute over aid to Airbus and Boeing was inflamed lately when Airbus requested British government aid for its A350 long-haul plane designed to compete with Boeing's plans to launch the 787 Dreamliner.
The United States believes financial aid given to Airbus to launch new aircraft is illegal under WTO rules, while the Europeans accuse Washington of subsidizing Boeing through military contracts.