STRASBOURG, Jan 11 (AFP) - The EU and the US agreed Tuesday to shelve WTO action and seek a negotiated end to a row over subsidies for Airbus and Boeing, avoiding what the EU said would have been a "disastrous" legal clash.
EU trade commissioner Peter Mandelson and his outgoing US counterpart Robert Zoellick said they had agreed to negotiate the phasing-out of all public aid to development and production of large civil aircraft.
"Today's agreement creates a positive atmosphere for more work to strengthen the economic partnership between the EU and the US, which is vital for both of us," said Mandelson.
Zoellick also welcomed the deal to launch three months of talks, during which both sides have agreed to a freeze on subsidies to their respective aircraft making giants.
"For the first time in this long-standing dispute, the US and the EU have agreed that the goal should be to end subsidies," said the US trade representative.
"To sharpen the focus of our work, we have further agreed to use the definitions and framework of the WTO subsidies rules as the basis for an agreement," he added in a statement.
The United States lodged a complaint against EU plane development subsidies to Airbus with the World Trade Organisation (WTO) on October 6, at the height of campaigning in the US presidential race.
The EU immediately countered with action against what it termed indirect US government subsidies for Boeing.
Mandelson said the tit-for-tat WTO action would have been a "gladiatorial clash" which may well have "succeeded in giving a Phyrric victory to both sides without actually resolving the basic dispute."
But he said: "The disputed settlement machinery of the WTO would have been overloaded to the point of breaking, and the poison spread by the conflict would have spilled into other aspects of the transatlantic relationship."
WTO officials have voiced concern that the dispute between the world's top trading powers over billions of dollars of support could paralyse the organisation's work.
The Geneva-based organization's chief Supachai Panitchpakdi has even criticised private companies like Airbus and Boeing, saying they were helping to fuel tensions in the global free trade system.
Both Brussels and Washington warned however that, while relieved at having avoided a legal clash, the real work is now beginning.
"Having averted what I regard as a potentially disastrous confronation we have a lot of work to do to complete our negotiation," Mandelson told reporters in Strasbourg.
Zoellick added: "There is much work to be done if we are to be successful in negotiating an ultimate agreement, but today does mark an important step in trying to end subsidies for large commercial aircraft."
Mandelson added that Europe's Airbus "can justifiably be proud of the excellent range of aircraft it is producing, and is clearly capable of competing in the global market place."
"I am glad that Bob Zoellick and I have been able to agree a way forward," he said.
01/11/2005 14:42 GMT - AFP