EU-US talks to clear the air on aid

Date: 27/11/1997

By Chris Johnstone

WHEN EU trade officials meet their US counterparts next week to discuss the issue of American aid to its planemakers, it will be more in hope than anger.

The Union will once again press Washington over suspicions that the US administration is not respecting its agreement to come clean over indirect government subsidies to its industry and is exceeding the limits set out in the 1992 bilateral deal on aviation subsidies.

In return, American officials are likely to demand answers to questions about how much aid the EU expects to give the aerospace sector under its Fifth Framework Research Programme and details of what grants will be made by European governments to finance the Airbus consortium's new large aircraft, the A3XX.

The US is worried that the enhanced priority the European Commission is giving aerospace will be translated into new funds for the sector.

Commission President Jacques Santer and Industry Commissioner Martin Bangemann have pinpointed aerospace as a sector where EU industry must sharpen up its act, restructure and catch up with the US.

However, neither side appears willing to push the other too far, and Union officials will not threaten to walk away from the subsidies agreement at the meeting in Brussels next Thursday (4 December) no matter how unsatisfactory US compliance is.

The regular six-monthly meetings provide a useful safety-valve for each side and, in particular, help to dissuade governments from using political and economic pressure to back up the sales patter of their aircraft-makers in lucrative foreign markets.

For all its demands for clarification, the US side admits it will be "mostly in listening mode" at the meeting.

EU officials believe they are winning the argument, both inside and outside the US, that spin-off aid from American military and space programmes should be better disciplined.

Boeing's take-over of rival McDonnell Douglas has not changed the European analysis of the problem. If anything, the fact that most US indirect aid will now be channelled into one massive firm with interests in both civil and defence sectors has strengthened EU calls for change. "There is a debate in the US regarding the justification and advisability for a single company to receive such amounts of aid," said one European official.

Preview and reports of a meeting of EU and US officials to discuss questions relating to subsidies to aircraft manufacturers, Brussels, 4.12.97.