"They Haven't Provided Grounds For Terminating The Agreement"

You can't do that. So says the European Union in response to the Bush administration's plans to pull out of a 1992 agreement on government subsidies to companies like Boeing and Airbus. The US announced its withdrawal from the accord last week, fueling the growing dispute between the world's two biggest trading partners.

"They haven't provided grounds for terminating the agreement and therefore we don't think it's a substantiated termination," said European Commission spokeswoman Arancha Gonzalez at a news conference in Brussels. "This may be a way for them to escape from the disciplines in the 1992 agreement." She was quoted by Bloomberg News.

The situation is fraught with charges and counter-charges as the US filed its complaint with the World Trade Organization last week. The US says European governments have pumped $15 billion in loans to Airbus since 1967. On the other hand, the EU says America has given Boeing $23 billion in aid since 1992. The Europeans say that aid has come in the form of local government tax breaks to Boeing, military research contracts and Japanese subsidies (see related story, this date).

When the US filed its case with the WTO last Wednesday, it said the 1992 agreement on aerospace subsidies had "outlived its usefulness" in view of "Airbus's maturation into a highly competitive company. It serves only to perpetuate the continuing subsidization of Airbus."

Now that the WTO complaint has been filed, both sides have 60 days to try to work things out on their own. If that doesn't work, the WTO will form a committee to delve into the matter. Negotiators for both the US and the EU say they're open to a settlement. Without one, some analysts say both Airbus and Boeing could be stripped of all subsidies.

FMI: www.wto.org