U.S. and EC agree to limit aircraft industry subsidies

April 02, 1992|By Roger Cohen | Roger Cohen,New York Times News Service

PARIS -- Settling one of the most bitter trade disputes between the United States and Europe, U.S. officials announced a tentative agreement yesterday limiting government support for the commercial aircraft industry.

For several years, Boeing Co. and McDonnell Douglas Corp. have accused Europe's fast-growing Airbus Industrie consortium of stealing business through unfair direct state subsidies.

Airbus has countered that U.S. manufacturers are indirectly subsidized by orders from the Pentagon and the space program and are engaged in a thinly veiled attempt to thwart a European upstart in an industry they have long dominated.

Airbus, owned by British Aerospace, Aerospatiale of France, Deutsche Airbus and CASA of Spain, has grown quickly since it was started two decades ago. It has about 26 percent of the commercial aircraft market -- less than half of Boeing's share but far more than McDonnell Douglas'.

Officials close to the negotiations said the deal would cap government support to Airbus for developing new aircraft at 30 percent to 35 percent of production costs.

Between 60 percent and 70 percent of the financing for recent Airbus projects such as the A320 and A340 planes, has come in the form of government loans.

The sort of indirect support that the Europeans have charged U.S. manufacturers with receiving would be limited to 5 percent of a company's sales of civil aircraft.

Since negotiators for both sides have consulted with their governments on the terms, formal approval is expected for the accord, which has been under negotiation for five years.

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