BRUSSELS (AFP) - The United States and European Union hit serious turbulence in talks on ending government support for aviation titans Boeing and Airbus Industrie.
The day-long talks at the European Commission, though described by the US side as "useful and frank", ended without agreement on whether to hold a new meeting on an issue that has taken on added importance in a US election year.
President George W. Bush has threatened to take the EU to the World Trade Organisation over subsidies for Airbus.
But officials said the EU tried to turn the tables at the Brussels talks by accusing Boeing of benefiting from illegal state aid for its new medium haul, fuel efficient 7E7 Dreamliner jet.
Airbus, in contrast, is betting its future on the A380 superjumbo, and EU sources said Boeing`s biggest fear was the European consortium would turn its sights on building a challenger to the 7E7.
"It would be difficult for us to tell Airbus that we would not give them any support when Boeing has just received big subsidies," Arancha Gonzalez, a spokeswoman for EU Trade Commissioner Pascal Lamy, said after the talks.
"We are taking this issue very seriously because after the massive support received by the 7E7, you can imagine that Airbus is not very happy," she said.
John Veroneau, general counsel at the US Trade Representative`s office and head of Washington`s negotiating team, said "we still did not have a meeting of minds" on the US goal of ending subsidies.
"Given the market parity between Boeing and Airbus, the US believes that now is the time to bring an end to any new subsidies for the development or production of large commercial aircraft," he told reporters.
The view was reinforced by Boeing which said in a post-negotiations statement: "The Boeing Company shares the US government`s view that it is time to put an end to subsidies for the development and production of large commercial aircraft.
"The launch aid and other subsidies that Airbus Industrie receives distorts the airplane market and inhibits competition."
Veroneau said the US government had not imposed a timeframe to wrap up the dialogue, although it reserved the right to seek WTO action against the EU.
Gonzalez, however, said the EU would take similar WTO action in that event to complain about state support for the 7E7 project.
In a rude shock to a company that once enjoyed overwhelming dominance in the commercial aviation industry, Boeing has now been overtaken by Airbus in numbers of aircraft delivered.
Airbus has, under a 1992 EU-US agreement, been allowed to receive up to one-third of its research and development costs from European governments.
Those subsidies, according to Boeing, have amounted to 35 billion dollars (28.8 billion euros) over the past 12 years and the US government says it is time to replace the 1992 accord.
But the EU retorted that the Airbus subsidies were repayable loans, while Boeing benefited from "indirect subsidies" through billions of dollars in "overpriced" Pentagon contracts for warplanes and research and development.
Boeing had received 3.2 billion dollars in tax breaks from Washington state alone for development of the 7E7, the EU said in a fact-sheet which claimed the "real issue" behind the dispute was the US company`s lagging competitiveness.
Veroneau denied that Boeing had received direct subsidies from US authorities, and said that Britain`s BAE Systems, one of Airbus`s two shareholders, was just as active in the US defence market.