US-EC DISSENT CURBS PROGRESS IN GATT AIRCRAFT NEGOTIATIONS

US-EC DISSENT CURBS PROGRESS IN GATT AIRCRAFT NEGOTIATIONS

Trans-Atlantic differences over tighter subsidy disciplines are holding back movement on a new international accord governing trade in civil aircraft in talks here that face a Dec. 15 deadline, trade sources said.

Both the United States and the European Community had serious problems with a new draft package put forward Tuesday by Mikael Linstrom, the Swedish chairman of the Committee on Trade in Civil Aircraft of the General Agreement on Tariffs and Trade. GATT is the international body that governs trade throughout much of the world.U.S. Trade Representative Mickey Kantor and his EC counterpart, Sir Leon Brittan, are expected to address the issue today in crucial trade talks.

Mr. Linstrom drafted two texts for consideration. "Track A" draws on the existing draft subsidies text in the Uruguay Round liberalization talks, but strengthens it by including provisions specific to the aircraft industry, sources said.

It also foresees substituting the 5 percent threshold for serious injury in the draft subsidies text with a more modified threshold.

The second option - "Track B" - is basically a blueprint of the U.S.-EC civil aircraft accord agreed in July 1992.

Japan, Canada, Sweden and Poland said they supported Track A, but Canada and Japan object to provisions dealing with royalty-based financing for development.

The United States argued that Track A still fell short of the tight disciplines Washington wants in any final accord. U.S. officials also said the exemption of some research and development from disciplines could be a major loophole.

Washington still favors Track B, but many other participants think the second option is not going anywhere, sources said.

Moreover, the EC stressed that Track A was riddled with imbalances and said Brussels would not accept it unless they were redressed, sources said.

In particular, the EC wants to grandfather all existing royalty-based loans and tighter disciplines on indirect subsidies for military activities.