EU Warns Of Trade War With US

European Union trade chief Peter Mandelson said Tuesday that the EU will file a counter complaint at the World Trade Organization claiming Boeing Co. receives illegal aid, launching new trade war with Washington.

The move reactivates a legal process at the WTO that was frozen by the EU when it entered negotiations with Washington in January to try to cut aid to U.S.-based Boeing and its European rival Airbus. It is also a reaction to Washington's decision late Monday to abandon months of talks and take the EU to a legal panel at the WTO over Airbus subsidies.

"I can assure you Europe's interests will be fully defended," Mandelson said, adding that he was "disappointed that the United States has chosen this confrontation with Europe."

Mandelson blamed the United States for escalating the dispute into a full-blown trade war.

"America's decision will, I fear, spark the biggest, most difficult and costly legal dispute in the WTO's history," he said, adding it would be "manifestly expensive and (involve) quite destructive litigation."

In announcing the U.S. decision late Monday, Trade Representative Rob Portman said the Bush administration felt it had to act because of preparations being made by EU member nations to commit $1.7 billion to Airbus for developing a new airplane, the A350, which is seen as a direct competitor to Boeing's new 787 Dreamliner in the market for midsize, long-distance jets.

The 787 seats between 200 and 300 people and is expected to be available for delivery in 2008. The A350 won't be available until 2010.

Mandelson said he hoped the trade war would not hit other areas of EU-U.S. relations.

The counter suit actions followed an offer from the EU on Friday to resolve the dispute, however U.S. officials said the offer was not enough.

Mandelson on Friday provided Portman with a new EU proposal that would have had both sides make similar reductions in subsidies. But U.S. officials viewed the offer as a step back from an earlier goal to eliminate all subsidies.

"We still believe that a bilateral negotiated solution is possible, but the negotiations won't succeed unless the EU recommits to ending subsidies," Portman said Monday.

Airbus is 80-percent owned by the European Aeronautic Defence and Space Co. Britain's BAE Systems PLC owns the remainder.