Last-ditch bid to save aircraft aid agreement

Date: 26/06/1997

By Chris Johnstone

EUROPE and the United States are set for a showdown meeting in Washington which is likely to make or break a five-year-old accord on the level of aircraft subsidies each side can give to its manufacturers.

European Commission officials have threatened to walk away from the agreement unless the US agrees changes to its terms.

But they have extended their end-of-June deadline for a response by one week, to give the Clinton administration a chance to salvage the 'peace' deal during top-level talks at the start of July.

The fragile 1992 bilateral agreement put an end to bitter transatlantic disputes over aircraft aid which soured relations and threatened to explode into a trade war.

But the Commission now says that despite the deal, the US has failed to come clean on the indirect government aid from defence and military projects which benefits its big producers of civil aircraft such as Boeing and McDonnell Douglas.

It wants Washington to agree to substantial changes which would force the US to declare the millions of dollars being pumped into the industry.

There are, however, no signs yet that Washington will give way, with US trade officials still insisting that they are happy with the current agreement and see no reason to meddle with it, although they have said they are willing to listen to 'a European presentation' on the issue.

“If the European side walks away, the agreement still stays in force for a year. That should give us enough time to decide what happens next,” said a US source.

Under the terms of the accord, each side must give the other a year's notice before it becomes null and void.

However, the EU has not specified whether it envisages a clean break or would merely ignore the agreement and allow it to gather dust.