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US, EU Heading for Battle over Aircraft Subsidies

The dispute between the United States and the European Union over the subsidies to their own aircraft makers is likely to continue beyond the April 11 deadline both sides had set for an agreement. The U.S. negotiator to the EU, Deputy Secretary of State Robert B. Zoellick, said Tuesday in Budapest that the two sides have not even been in contact for more than a week.

The last time Mr. Zoellick and EU Trade Commissioner Peter Mandelson spoke the conversation reportedly got rather heated. Speaking Tuesday in Budapest, Mr. Zoellick offered little hope that a settlement could be reached before April 11.

"From my last conversation with Commissioner Mandelson, I did not see that as probably reaching the fulfillment of the time we set forth," said Mr. Zoellick.

Last January, in an effort to avoid taking the dispute to the World Trade Organization, the two sides gave themselves 90 days to negotiate a phasing out of subsidies to develop commercial aircraft.

The dispute dates back to October of last year, when the United States filed a complaint with the WTO because of a loan the EU gave Airbus for its new giant aircraft, the A350, which would challenge Boeing's new 250-seat long-range jetliner, the 787.

The Airbus company overtook Boeing as the world's largest manufacturer of big commercial planes in 2003.

Mr. Zoellick, who stopped in Budapest on a 14-country tour of Europe, suggested the competition between the two firms would be more fair and in line with WTO standards without the EU's so-called "launch aid" for Airbus, but he said there was no willingness in Europe to abandon the subsidy.

"Some of the officials from Airbus said they want to move ahead with launch aid,” added Mr. Zoellick. “And at least from what we have been able ascertain there continues to be difference of view in quarters of Europe to eliminate launch aid."

The EU, for its part, has criticized Washington for its unwillingness to reduce support it gives Boeing in the form of federal contracts for military and space research.

Deputy Secretary Zoellick touched on the diplomatic impasse in Budapest after talks with Foreign Minister Ferenc Somogyi of Hungary, which joined the European Union last year.

Hungary was a close ally of the United States in Iraq till it decided to withdraw all its forces from the country before Christmas last year, although it later promised to help in the training of Iraqi security forces.

While he did not directly criticize Hungary's troop withdrawal, Mr. Zoellick said the best way to build transatlantic relations was to share each others political agendas.