US accuse Britain of stoking trade row with £340m Airbus loan
• Mandelson denies move is a naked state subsidy
• Funding will safeguard 6,000 aerospace jobs
- guardian.co.uk, Friday 14 August 2009 19.14 BST
- Article history
The trade dispute between the US government and the European Union over state backing for Boeing and Airbus escalated after Washington accused Britain of taking a "major step in the wrong direction" by pumping £340m into the Airbus A350 widebody jet programme.
Lord Mandelson, the business secretary, drew rebukes from US officials after announcing that the UK government will help fund the construction of the rival to the Boeing Dreamliner. The £340m loan towards building wings for the A350 will secure more than 1,200 jobs at plants in Filton, near Bristol, and at Broughton in north Wales. Lord Mandelson denied that the loan constituted a naked state subsidy and described the ongoing legal row between the US and the EU as "senseless".
He said: "This is neither a bailout nor a subsidy, we're not sinking money from which we'll never see a return. This is a first-rate investment in British engineering expertise."
However, the Office of the United States Trade Representative, which negotiates trade agreements on behalf of the US president, slammed the move. The US has brought a case against the EU at the World Trade Organisation, which is expected to deliver preliminary findings on alleged multibillion euro subsidies to Airbus over the next month. The EU has launched a countersuit, claiming that Washington backs Boeing with substantial payments, with Airbus alleging that $5bn (£3bn) of Federal cash has been invested in the Dreamliner project alone.
"The commitment of launch aid, or any other form of preferential financing, by any of the EU member states would be a major step in the wrong direction," said the USTR. "We want to resolve the problem of WTO-inconsistent aircraft subsidies, but the commitment of additional support would make that even harder."
Mandelson, who launched the counterclaim against the US government when he was European trade commissioner, said Washington and Brussels had become embroiled in "senseless tit-for-tat" disputes. "I did not welcome it, or seek it, but it was inevitable once the Americans started down this course," he said.
Boeing said it was "disappointing" that EU states were investing vast sums in the A350 programme ahead of the WTO announcement. The A350, which has received nearly 500 orders from 30 customers, has received support worth €1.1bn from Germany and €1.4bn (£1.2bn) from France. "Airbus should finance its aircraft development using its own cash and commercial loans," said a Boeing spokesperson.
A spokesperson for Airbus said the company needed state backing to compete with its American rival. Airbus has plants in Germany, France, Spain and Britain and is owned by EADS, whose shareholders include the French and Spanish governments as well as German car manufacturer Daimler.
"The objective is to achieve a level playing field," he said.
Ministers hope that in addition to supporting jobs at Filton and Broughton the loan will help create and sustain more than 5,000 jobs within the supply chain across the UK. The news follows Rolls-Royce's announcement last month that it will open four new factories in the UK, creating or saving 800 jobs, helped by the government's building Britain's future programme.
The French and German governments have already announced support for the A350 and Spain is in discussions with Airbus.
Mandelson said: "This agreement is excellent news for the UK aerospace sector and for the thousands of British workers within Airbus and its supply chain.
"The UK's aerospace industry is world-class and capable of competing successfully with companies across the world. We recognise the vital role Airbus, and its supply chain, play in the UK."
He went on: "Aerospace is a sector that we are rightly proud of in the UK. It stimulates innovation across industry, demonstrates our capability to work with the most advanced technologies, and provides high-quality, highly skilled employment. It is a sector at the heart of our advanced manufacturing strategy.
"This agreement is further evidence of this government's long-term commitment to the UK aerospace industry and its future success. Aerospace is one of the UK manufacturing's crown jewels, and manufacturing is one of the UK economy's crown jewels."
Airbus's president and chief executive, Tom Enders, said: "We welcome the UK government's decision to invest in the most advanced, innovative, and eco-efficient aircraft in its market segment."
"This partnership with the UK government means that the UK taxpayer can expect a sound return on their investment, and ensure the aviation industry continues to thrive in Europe and around the world."
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