Washington, Dec. 18 (Bloomberg) -- President Bill Clinton warned European Union leaders they were risking a trade dispute with the U.S. over plans to subsidize Airbus Industrie's new super- jumbo passenger aircraft, U.S. officials said.
Clinton told the EU officials at a summit in Washington that loans to develop the new A3XX jet, which would be the largest in the world if it enters service as planned in 2005, must not be made by EU governments on preferential terms.
``We have impressed upon them, as did the president today -- quite strongly -- that funding needs to be on a commercial basis,'' said U.S. Trade Representative Charlene Barshefsky. ``We have asked that the member state governments disclose the terms on which the funding will be provided.''
Boeing Co.'s stock rose more than 5 percent today, closing at $68.50. Airbus competes with Boeing in the large commercial airliner market.
Gene Sperling, Clinton's top economic adviser, said Clinton told European Commission president Romano Prodi and French President Jacques Chirac that if the matter ``is not taken seriously, it could be a difficult issue between the U.S. and the EU on trade in the future.''
The meeting among the leaders took place at a luncheon during the twice-yearly U.S.-EU summit that dealt with issues ranging from transatlantic trade disputes over beef and bananas to European security and defense concerns.
Barshefsky in June asked the governments of Germany, France, and the U.K. to disclose the terms of the loans they had agreed to give Airbus to finance development of the 550- to 650-seat aircraft, more than 50 of which have already been ordered by airlines around the world.
She said today those governments had so far declined to provide that information.
``This is a situation where we're talking about government financing, we're not talking about financing from private banks,'' she said. ``The government of Germany has indicated it would commit funds; the government of the United Kingdom and the government of France similarly.
``Under international trade rules, to the extent there is a concern about subsidization, governments are required to disclose the terms on which financing is to be provided,'' Barshefsky said.
Pascal Lamy, the EU's trade commissioner, declined to answer questions about Airbus after speaking today to the American Enterprise Institute, a Washington-based think tank.
Boeing Backs Clinton
A Boeing spokeswoman said the company supports the administration's efforts to ensure that World Trade Organization obligations are respected.
Virnell Bruce said Boeing expects the A3XX project ``will go forward, but we believe that it should be on commercial terms.''
She said it will be up to the government to determine whether the financing is on such terms.
Barshefsky said the U.S. has made it ``very clear'' that financing must be ``consistent with WTO rules, including with respect to subsidies, and therefore that all financing provided must be on commercially consistent terms.''
That means the EU government cannot lend to Airbus on better terms than the company, which is owned by British Aerospace Plc and the European Aeronautic, Defense and Space Co., could get borrowing from a commercial bank.
Barshefsky said the financing may be breaching global trade rules.
``First of all, the governments have obviously been very quiet on the manner in which the financing will take place,'' she said.
``And second, all indications are, from a variety of observers to the scene, that the funding for the A3XX will not be provided on commercially consistent terms, but will be provided with a sharp element of preference which may well constitute a violation of WTO rules,'' she concluded.
Dec/18/2000 17:28 ET