The U.S. stepped up its complaint about the European Union's aid to Airbus, filing a World Trade Organization (WTO) dispute settlement case, to which the EU promptly retaliated with a rivaling case against U.S. subsidies for Boeing.

Dissatisfied with what a senior U.S. trade official called the EU's "stonewalling and stalling" on its attempts to end aircraft subsidies, the U.S. simultaneously withdrew from the 1992 bilateral agreement for trading large civil aircraft, citing EU's non-compliance.

The U.S. claims the EU has given $6.5 billion in launch aid and other loans and infrastructure support to Airbus for its A380 program since signing the 1992 deal, which was "expected to lead to a progressive reduction of subsidies" but "has instead become an excuse for EU governments to continue subsidizing Airbus."

In filing its counter claim, the EU calculated that Boeing has received about $23 billion in subsidies from the U.S. government since 1992, including more than $5 billion for development of the 7E7. The two sides agreed in the 1992 bilateral to limit indirect support, such as benefits of aeronautical applications of NASA or military programs, to 3% of each side's large civil aircraft (LCA) industry turnover. But according to the EU, U.S. manufacturers received $2.7 billion in 2003, or 11.9% of their full-year revenue.

The EU slammed the U.S. move to escalate the dispute as election year politics, adding, "The real issue is one of competitiveness." From 2001 to 2003, Boeing invested only $2.8 billion of its own funds in commercial aircraft research and development, compared with $9.4 billion by Airbus, the EU calculated.

The U.S. case "is obviously an attempt to divert attention from Boeing's self-inflicted decline," EU Trade Commissioner Pascal Lamy said in a statement. "It also shows that the U.S. were never seriously interested in seeking to renegotiate the existing 1992 EU-U.S. bilateral agreement."

Both sides have filed requests for consultation, requiring under WTO rules for them to meet within 30 days. If the complaining party, in this case, either side, is not satisfied with the progress of the consultations after 60 days, it can take the case for review before a WTO panel.

An EC memo based on a Sept. 16 meeting between U.S. and EU trade officials said a WTO panel would likely rule against subsidies for both Airbus and Boeing. That scenario of penalties for Airbus as well as Boeing, which could lose its share of the $3.2 billion in tax breaks that Washington is planning to give in the next 20 years to aircraft manufacturers in that state, would still be "far better than the status quo," a senior U.S. trade official told reporters in a conference call.

The official was hopeful that consultations would yield a new mutually satisfactory outcome without involving a WTO panel, giving as an example the first ever U.S. trade case against China, which ended after an agreement was reached in the consultation phase.