EU seeks to restart talks over aircraft subsidies

The European Union sought yesterday to breathe new life into stalled negotiations with the US over aircraft subsidies to Boeing and Airbus after presenting a "fresh proposal", understood to involve a proposed cut of about a third in the launch aid for Airbus's A350 and other aircraft projects.

The offer was made by Peter Mandelson, the EU's trade commissioner, in a phone conversation with Rob Portman, the US trade representative, on Friday. However, the decision by Brussels to publicise the gesture seemed to irritate Washington rather than lower tensions.

The aircraft subsidy talks broke down in March amid personal acrimony between Mr Mandelson and Mr Portman's predecessor as USTR, Robert Zoellick.

Richard Mills, USTR spokesman, said yesterday: "We had an agreement with the Europeans that each side would quietly reflect on the Friday call over the weekend. We're extremely disappointed that they've begun spinning to the press."

Mr Mandelson's spokeswoman would not say how the latest EU proposal differed from a previous offer by Mr Mandelson to Mr Zoellick. But she said that it was "more specific in the amounts and the timeframe" for possible subsidy cuts. Last week, Peter Allgeier, the US deputy trade representative, told a congressional hearing that he was pessimistic about the chances of reaching a deal and averting what would be the biggest arbitration in the history of the World Trade Organisation.

Underlining the tough US stand towards launch aid granted to Airbus, he said the US goal remained "to eliminate the subsidies, not just put a cap on them".

Mr Mandelson's offer comes as the four governments that are shareholders in Airbus are under pressure to grant launch aid for the A350 aircraft, which is due to challenge Boeing's most ambitious and promising project, the 250-seat "Dreamliner" 787.

Airbus is hoping to launch the A350's manufacturing programme at next month's Paris air show, following last month's successful test flight of the A380, the world's largest commercial airliner. The launch aid for the A350 is expected to amount to about €1.3 billion.

Mr Mandelson's spokeswoman said Airbus had been kept abreast of his latest proposal and what impact it could have on "money that has not been disbursed". But Mr Mandelson has repeatedly stressed that launch aid could only be cut if Washington offered a commensurate reduction in subsidies to Boeing.