EU: You Stop Propping Up Yours, We'll Stop Propping Up Ours

Sure, says the European Union, we'll cut subsidies to Airbus -- just as soon as the US cuts its subsidies to Boeing. That's pretty much the EU position going into trade talks with the US on Thursday.

It was the latest shot fired in an increasingly hot war over how much help each company gets from its respective governments. The Bush administration has demanded a review of the 1992 trans-Atlantic accord that controls subsidies on both sides of the ocean. As it stands, that pact allows countries to contribute up to 33-percent of the development costs in developing a new line of aircraft.

Already, the EU has ruled out any unreciprocated moves on the issue, as demanded by the US. "We would not accept this unilaterally," EU spokeswoman Arancha Gonzalez.

President Bush last month said he would challenge what he termed "unfair" EU subsidies for Boeing's chief rival. He threatened to make his complaint to the World Trade Organization.

At the center of the controversy is a complaint and a cross-complaint: The US says EU governments loan money to Airbus at ridiculously low rates. If the new model isn't profitable, then Airbus doesn't have to pay them back. On the other hand, the EU says America is propping up Boeing with government contracts in non-commercial aviation and aerospace projects. The EU also complains about the tax breaks and other incentives offered to Boeing by communities hoping to land the 7E7 production facility.

FMI: www.boeing.com, www.airbus.com