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EU, US set for showdown
- Airbus loans threaten trade row

London, May 19 (Reuters): The EU and US looked closer to a showdown at the World Trade Organisation today after Airbus said it hoped to win controversial funding from Britain for a new plane.

The US has threatened action at the WTO if European governments provide loans to Airbus to develop its next new plane, the twin-engine A350.

A three-month truce to avert what might prove to be the largest transatlantic trade war yet ended in April without a breakthrough.

“We’re keen to get a decision by mid-June,” Airbus UK spokesman Howard Berry said of the launch aid application to the UK government. “It would have gone in about five weeks ago.”

The aid decision would, therefore, coincide with the Paris air show, the industry’s largest, where the rivalry between Airbus and Boeing usually takes centre stage. The EU said negotiations with the US to avert a trade war were still underway.

“The commission is still in discussion with the US, and therefore no doors are closed,” European Commission spokesperson Francoise Le Bail told a news briefing.

The US last year pulled out of a 1992 bilateral aviation trade agreement under which Airbus tapped repayable state loans to cover a third of its new aircraft development. Washington also filed a complaint with the WTO as a warning that Airbus should not receive such loans, which the US sees as unfair subsidies.

The bilateral clash over the issue reflects the corporate battle between Airbus and Boeing. The US company, which dominated the market for decades, is fighting back after losing the lead in deliveries in 2003.

Airbus’s bid for funding for the mid-sized A350 comes as it looks to counter Boeing’s new 787 Dreamliner, due in 2008.

It also comes as Airbus winds up a $15.2-billion programme to develop the mammoth A380 double-decker set to enter service late next year.

“Airbus is applying for launch aid for a new aircraft before its huge financial gamble, the A380, has even entered service and on which it owes billions to Europe’s taxpayers,” a Boeing spokesperson said.

Europe’s top trade negotiator said it would be Washington, not Boeing that would negotiate over the matter. “Boeing is entitled to its view ... but it is not a matter for Boeing, it is a matter for the US government,” EU trade commissioner Peter Mandelson said on a visit to the West Bank.

The loans Airbus receives from state governments are to be repaid but not if the programme proves economically unsuccessful.

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