Boeing's CEO sees progress in dispute over plane subsidies

PARIS — The prospect of a negotiated settlement to the trans-Atlantic trade dispute on plane subsidies has improved, Boeing Chairman and Chief Executive Jim McNerney said Wednesday.

"I'm beginning to see signs that the two governments are increasing the pace of their dialogue, and I'm supportive of that," McNerney told reporters in Paris of the dispute within the World Trade Organization (WTO) over public aid to Boeing and its European rival, Airbus.

Yves Galland, head of Boeing's French division, elaborated, saying a "certain number of contacts at government level" had boosted hopes for a settlement to the dispute, which threatens to be the most complex and costly that the WTO has ever adjudicated.

The standoff began in late 2004, when Washington tore up a 1992 EU-U.S. pact on aircraft subsidies and filed a formal WTO complaint against EU government aid to Airbus. Brussels retaliated in a countersuit citing tax breaks and military funding to Boeing and its suppliers, including Japanese companies working on the 787 Dreamliner, due to enter service in 2008.

A spokesman for EU Trade Commissioner Peter Mandelson said Wednesday that Europe is seeking formal negotiations on a possible settlement. "We are exploring the possibilities of relaunching negotiations," Peter Power said in an interview with Dow Jones Newswires. "But we have to agree to terms for such negotiations, and unfortunately we're not there yet."

While the United States still feels it has a "very strong case," U.S. Trade Representative Robert Portman said in Geneva on Wednesday, "We would prefer not to take that litigation forward if we could negotiate something. So we are always open to negotiation, and we have had continued conversations with the European Union."

The U.S. Air Force said last week that Boeing, Airbus and any other bidders for a contract to supply refueling tanker planes would be required to disclose the subsidies they receive.

McNerney said Boeing would comply with the demand but declined to say whether the information disclosed would include details of support for the 787 Dreamliner program accorded by the state of Washington.

"I think it's a prospective discussion," he said. "How we are funded will be laid out as clearly as required by the [request for proposals]."

German Chancellor Angela Merkel is expected to discuss the WTO plane subsidies dispute with President Bush during a visit to the United States that began Wednesday.

Addressing another issue at the Paris news conference Wednesday, McNerney ruled out deeper diversification at Boeing, Reuters reported. Speaking two days after Boeing announced the $1.7 billion purchase of aerospace parts supplier Aviall, McNerney said some people had urged him to diversify and move Boeing away from its roots as the top U.S. commercial jet maker and No. 2 defense contractor — but he would not. "My first priority is internal growth," McNerney said.

Information from AP writer Sam Cage and Dow Jones Newswires correspondent Juliane von Reppert-Bismarck is included

in this report.