Clinton may step up aid to aircraft industry

PRESIDENT Bill Clinton signalled yesterday that he will consider stepping up direct federal funding for the US aircraft industry before attempting to challenge European subsidies to Airbus through trade retaliation.

After talks in Washington with the French President, Francois Mitterrand, Mr Clinton denied reports that he was considering backing away from an agreement reached with the European Community last year on subsidy levels to the Airbus consortium, saying it should be 'honoured and strictly adhered to'.

For the first time, however, he outlined his preference for responding to competition from Airbus by stepping up federal assistance for research and development in American companies - meaning Boeing and McDonnell Douglas - into the next generation of aircraft.

After seeming almost to praise the European strategy of supporting Airbus, the President said the Airbus pact gave the US 'the opportunity to significantly invest in the development of new technologies for new generations of aircraft, and we have to take that opportunity in order to be competitive'.

Executives at Airbus in Toulouse, in south-western France, and other European analysts have suspected for some time that the Clinton administration's first move would be to increase federal assistance for US companies rather than renege on last year's subsidy pact.

This week, Congress is expected to approve Mr Clinton's proposal to establish a commission to consider policy options for aircraft manufacturers and the airlines, which have reported huge losses.

The President committed himself to taking some initiatives in the sector after telling workers at Boeing in Seattle two weeks ago that big lay-offs planned in the company were caused partly by the competitive strength of Airbus, assured in part because of the government money given to it.