Trade row clouds Major's US talks

TRADE DISPUTES and resurgent tensions over subsidies to the European aircraft consortium, Airbus, are casting an unwelcome shadow over a first meeting in Washington today between John Major and President Bill Clinton.

Though the two leaders are scheduled principally to discuss foreign policy issues, including the situation in Bosnia, aides on both sides admit that trade matters, ranging from Airbus to the longer- term fate of the Gatt world trade negotiations, are certain to be aired.

The Prime Minister will, in particular, be searching for some reassurance from Mr Clinton that, in spite of some early hostile measures already enforced or pending against Europe, his administration remains committed to countering protectionism and completing the trade talks as fast as possible.

Mr Major's arrival here also coincides with the unfolding, over recent days, of the President's proposals for a limited form of industrial policy - representing a firm departure from the privatisation precepts formerly shared by US and British governments - to bolster emerging, hi-tech businesses.

The friction over Airbus came fully to the surface on Monday when the President visited the Boeing aircraft company in Seattle, which last week announced plans to reduce its workforce by 23,000 over 18 months. 'A lot of these lay-offs would not have been announced if it had not been for the dollars 26bn ( pounds 17.9bn) that the United States sat by and allowed Europe to plough into Airbus over the last several years,' the President told Boeing workers.

There was some relief among European officials, however, that the President stopped short of suggesting either that he would respond by stepping up federal support for Boeing or that he would seek to unpick an EC-US agreement reached last year on Airbus funding. He said instead that Washington would seek to ensure that the agreement was fully respected.

'We fully agree that the agreement should be properly adhered to,' a British spokesman said. Defending continuing assistance to Airbus, he added: 'There is no way that these are free hand-outs. They are loans that are repaid by a levy on sales.'

Aeronautics do not seem to feature in the new technology policy outlined by President Clinton on Monday in Silicon Valley, California. Targeted more directly at the advanced computer and automobile industries, the plan aims to switch federal funding from defence to commercial research, to include subsidies for developing specific, marketable products.

Mr Clinton underlined the theme of new partnership between business and federal government at a meeting with the American Chamber of Commerce yesterday. Stressing its value, he said: 'We have to change the way government operates and relates to the pivate sector in a very fundamental way.'

Ongoing efforts to defuse the two specific EC-US trade disputes concerning duties on US steel and mutual access to telecommunications and other utility markets appear, meanwhile, to have made scant progress. The Prime Minister will ask specifically that US sanctions due to come into effect by 22 March - which would bar European companies from bidding for some US federal utility contracts - be put off by the President as a sign of goodwill.

Hamish McRae, page 19