The European Union and the United States have agreed to continue negotiations over subsidies to rival aircraft firms Boeing and Airbus, despite the passing yesterday of a deadline for talks.
A spokeswoman for EU trade commissioner Peter Mandelson said there was still an opportunity for both sides to avoid launching legal action through the World Trade Organisation (WTO).
"This date doesn't mean that it triggers any automatic action and we believe we should pause for further reflection and assess the situation. While there is a chance to negotiate and to avoid dispute, we should try to make good use of this period," she said. "This period cannot drag on for too long because there are important commercial interests at stake."
US trade officials have said they will not take the case to the WTO immediately, unless the EU resumes development loans, known as launch aid, to Airbus. Airbus officials said yesterday they had suspended requests for aid from France, Germany, Spain and Britain.
On January 11th, the EU and the US agreed a three-month deadline for negotiations to resolve the dispute but there has been little progress, as relations between Mr Mandelson and his outgoing US counterpart, Bob Zoellick, have deteriorated.
Airbus wants the four participating EU countries to put up €1 billion - one-third of the cost of launching its new A350 airliner - in the form of loans that would be repaid gradually as Airbus sold more of the new aircraft.
Washington claims that such loans are illegal under WTO rules and that they are designed to prevent Boeing from competing fairly with its rival.
Brussels counters that Boeing receives much greater government support in the US, in the form of contracts with NASA and the Pentagon, a tax break from Washington state worth $3.2 billion over 20 years and through a federal tax loophole that saves the company $200 million a year.
Mr Mandelson yesterday accused Washington of following a double standard in its approach to subsidies.
