Airplane Case to WTO Could Spell Ag Trade Trouble

Move to fight European Union over aircraft subsidies may cause a rift between U.S. and EU negotiators as they work on Doha Round of talks. Compiled by staff

Published on: May 31, 2005

Ag trade talks have been a hot issue in the World Trade Organization as Doha Round discussions continue. And often European and U.S. officials have joined forces to push ahead an agenda that aims to work through a range of issues. But a new fight heating up in the WTO between these two trading partners could cause more trouble. This week U.S. officials announced they will take their case against Airbus Industries subsidies to the WTO despite months of talks with European Union officials.

During a Farm Progress visit with ag officials in Washington in April the U.S.-EU dispute over aircraft came up during the discussions. House and Senate officials noted that the way the airplane battle goes could be a harbinger over how talks on EU ag subsidies progress.

Taking the Airbus issue to the WTO creates what will be the most expensive case every brought before the global trade body. The U.S. says government subsidies over airplane sales gives the European plane maker an unfair advantage.

The battle is coming to a head because many believe that Airbus will get more than $1 billion in European launch aid for a new A350 midrange plane that will compete directly against the new Boeing 787. In a Wall Street Journal article, U.S. Trade Representative Rob Portman notes: "For almost a year, the United States has tried to convince the EU to negotiate an end to subsidies for large civil aircraft. Unfortunately, at this point, the EU is no longer willing to hold off on launch aid, and has only proposed to reduce subsidies, not end them."

How the EU attitude over plane subsidies may extend to its talks over ending other payments - including those in agriculture - remain to be seen. The case - which could take two years or more to resolve - will strain U.S.-EU relations during Doha Round discussions. In those talks, the U.S. and EU have often joined forces to advance the negotiations.