The United States and the European Union moved closer yesterday to a legal clash over the support they give to rival aircraft makers, raising the chances of adding a highly charged dispute to the strained transatlantic trade relationship.
Following a meeting between the two sides' top trade officials, Anthony Gooch, an E.U. spokesman in Washington, said "hopes are dwindling" for renegotiating an agreement governing the subsidies that are allowed for Airbus and Boeing Co. A mutually-satisfactory accord, he said, "is looking now like a long shot."
That downbeat assessment of the meeting between U.S. trade representative Robert B. Zoellick and European trade commissioner Pascal Lamy suggested that the globe's two biggest economies are headed for another showdown at the World Trade Organization.
Washington and Brussels have tangled at the WTO over a number of issues in recent years, including matters such as export subsidies, dumping duties and beef hormones, which have led to each side imposing hundreds of millions of dollars in punitive duties against the other's goods.
The stakes in the aircraft spat are particularly high because of the importance to both economies of the commercial aircraft industry. Aircraft are a key U.S. export. Although Chicago-based Boeing dominated the global market for many years, Airbus, which is based in Toulouse, France, has made steady gains over the past decade and recently began outselling Boeing.
Boeing, backed by U.S. officials, complains that Airbus has been unfairly allowed to develop aircraft with subsidies totaling about $15 billion from the governments of France, Germany, Britain and Spain. A 1992 agreement allowed the Europeans to provide such aid, but Washington has insisted in recent months that the accord must be revised to reflect Airbus's market strength.
Presidential politics have entered the dispute, with President Bush promising Boeing workers this summer that unless the Europeans dropped the subsidies the United States would bring a case at the WTO. Global trade rules impose strict discipline over subsidies for exported goods.
The E.U. has retorted that Boeing itself receives subsidies of various sorts, such as tax incentives from the state of Washington and military contracts from the Pentagon, so a renegotiated pact would have to involve a mutual reduction in government support. European officials have also warned that they would respond to a WTO case with their own complaint.
But the talks between Zoellick and Lamy evidently showed scant promise that a deal was possible. Asked whether further discussions were scheduled, Gooch replied, "Not as far as I'm aware."
Zoellick's spokesman, Richard Mills, issued a more neutral statement on the outcome of the talks, saying that the two sides "discussed their respective positions."
"As the president has said, we think these subsidies are unfair and we will pursue all options to end these subsidies -- including bringing a WTO case, if need be," Mills said. "We will continue to consult with domestic stakeholders and the Congress, along with officials in Europe, and we will soon make a determination as to next steps."
Mills declined to comment on the gloomier remarks by his European counterpart. "My statement is what I'm going to be able to say today," he said.