Europe hit Washington with a tit-for-tat lawsuit in their battle over subsidies for aviation rivals Airbus and Boeing, opening the way for one of the biggest commercial disputes in history. European Union Trade Commissioner Peter Mandelson voiced regret at the multi-billion-dollar ?gladiatorial contest? set to be played out at the World Trade Organization, blaming it on Boeing?s ?tight political grip? on Washington.

?I am disappointed that the United States has chosen confrontation with Europe,? he said a day after Washington reopened a WTO case against Airbus aid. ?The WTO has better things to do with its time than referee a grudge fight.? US officials expressed confidence in the ability of the WTO to handle the complicated, high-stakes dispute, saying that it was one of the things it was designed to do. The costly showdown at the Geneva-based trade body, which may drag on until the end of 2006, could put a severe strain on transatlantic relations at a time when the two sides are trying to bury friction over the US-led invasion of Iraq.

Brussels and Washington said in a joint statement on Monday that they would not let their aviation spat affect other issues, including talks with developing nations on a global free trade blueprint due to reach a climax in December. Nevertheless, the stakes will be huge. The biggest transatlantic trade face-off to date was over US export tax breaks worth $4 billion a year. But the two sides accuse each other of paying their aircraft makers many times that sum, and the winner in a WTO case could be allowed to retaliate to recoup many billions of dollars in lost sales.

<B>?Our hand was forced? </B>

Brussels and Washington agreed in January to put competing cases filed at the WTO on ice, and seek a negotiated settlement that would eliminate subsidies for their aircraft champions. Talks broke down on Monday after the EU said that, to avert a WTO clash, it had offered to cut ?launch aid? loans for Airbus?s planned A350 airliner by around 30 percent providing this was balanced by cuts in support to Boeing. That was not enough for Washington, which is worried that soft loans from EU states for the A350 could challenge Boeing?s new 787 Dreamliner and wants such aid to stop altogether.

?We prefer a negotiated outcome, but since some European member states are clearly moving to grant launch aid, our hand has been forced,? US Trade Representative spokesman Richard Mills said after the EU formally revived its lawsuit in Geneva. Mandelson said the US move appeared to have been timed so that Boeing could ?rain on Airbus? parade? at the Paris air show in mid-June, at which the company hopes to launch the A350. US officials denied that and said they were still open to negotiating a deal while the cases proceed at the WTO.

Airbus, owned by Franco-German-Spanish aerospace firm EADS and Britain?s BAE Systems, snatched the crown as the world?s largest commercial aircraft maker from Boeing in 2003. Mandelson complained the United States had only ever wanted to discuss an immediate end to launch investment for Airbus and had never wanted to engage in a ?serious, even-handed discussion of the much larger subsidy programs for Boeing.? His office issued a breakdown of support channeled to the two companies since 1992, concluding that for Airbus it was $3.7 billion while for Boeing it was $29 billion.

<B>John CHALMERS</B>