Mandelson's peace move in Airbus subsidies battle

EU Trade Commissioner Peter Mandelson has launched top-level negotiations to avert a damaging economic war between America and Europe over subsidies for aircraft maker Airbus.

Mandelson, who took up the role last month, is encouraging the two giant trading blocs to draw a line under the longrunning row.

Failure to produce a deal in the next month will trigger US complaints to the World Trade Organisation, resulting in a long legal battle and a potentially devastating trade war.

Fears were compounded last week when Airbus launched its A350 aircraft to compete with Boeing's planned Dreamliner and said it would seek launch aid. Influential voices in America are already calling for Airbus planes to be banned from US airspace.

Mandelson's efforts to prevent the trade dispute 'going nuclear' has support from Boeing executives. But sources at Mandelson's offices are concerned at US trade Commissioner Robert Zoellick's tougher line.

Sir Michael Jenkins, president of Boeing's UK operations, said: 'We are encouraged that Mandelson wants to sort this out before it ends up in litigation and to look at the whole issue of launch aid for future projects.'

While Airbus is entitled to ask for launch aid, the governments involved in the partnership --Britain, France, Germany and Spain - can deny the request.