Both sides could lose in Airbus-Boeing row - EU

Brussels and Washington may both lose if their row over subsidies for aircraft rivals Airbus and Boeing goes to a WTO dispute settlement procedure, the EU's new trade chief said in comments published yesterday.

"You could say that the likely outcome is that we both win or we both lose and I am perfectly prepared to take that chance," Trade Commissioner Peter Mandelson, who took office yesterday, told the Financial Times.

The dispute went to the World Trade Organisation after the European Union and the United States failed to agree new terms for their 12-year pact that set limits on state aid.

The two sides filed tit-for-tat complaints with the WTO last month, though they still have time to cut a deal before it goes to a dispute settlements panel.

Washington has said it is ready to work for an accord and Mr Mandelson, in a separate interview with the Wall Street Journal Europe, said he still preferred further discussions based on the 1992 agreement.

Many lawyers and diplomats believe that the WTO is likely to rule that both sides offer illegal aircraft subsidies, which would give the economic superpowers the right to impose billions of dollars of trade sanctions on each other.

Nevertheless, Mr Mandelson said he was prepared to go the distance at the WTO in the dogfight over the world's top two plane makers.

"We will see this through the... dispute settlement procedure if we need to," he said. "If need be, I will certainly see this through and I know the EU case is strong."

The Wall Street Journal Europe quoted Mr Mandelson as saying the United States rushed needlessly to the WTO in the aircraft case, and calling for both sides to discuss issues extensively before going to the Geneva-based trade body in future.

"I feel a greater effort should be made on both sides to use our early-warning mechanism more effectively... that's something that needs fresh emphasis," he said.

Mr Mandelson said business regulations probably posed a bigger hindrance to transatlantic trade than headline-grabbing rows, of which there have been a string in the last two years.

He has started work on a list of US and EU regulations that he said should be made more similar to promote trade and investment. Mr Mandelson - one of British Prime Minister Tony Blair's closest allies - is seen as a potential force to mend relations between the EU and Washington, which have been soured by the Iraq war and several trade disputes.

But he said transatlantic trade would not be his "sole or exclusive preoccupation": his priority would be to complete the Doha round of multilateral trade negotiations in 2006.