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UPDATE 1-France wants to check if US car aid fits WTO rules

Published 02/26/2009, 09:41 AM
Updated 02/26/2009, 09:48 AM

* Sarkozy remarks fuel protectionism debate

* France wants coordinated EU plan to help car industry

* EU says it may go to WTO if U.S. measures hurt its firms

(Changes dateline, adds details, background)

By Yann Le Guernigou

SAINT-VULBAS, France, February 26 (Reuters) - France wants U.S. aid to the car sector to be checked to see if it fits World Trade Organisation rules, President Nicolas Sarkozy said on Thursday, escalating tensions over rival industrial policies.

Sarkozy, who has announced aid for French automakers that critics have called protectionist, also said he would ask for a coordinated European plan to help the car industry.

U.S. officials are this week meeting car company executives to discuss the industry's requests for billions of dollars in extra aid to help it through the financial crisis.

"We need to see if the U.S. aid is compatible with the WTO," Sarkozy said at a roundtable discussion in eastern France on the car industry, a sector which accounts for one in 10 French jobs.

He said Europe must show itself to be "less naive" and added that within Europe, officials should pay less attention to checking whether car plans meet EU rules.

Leaders of the European Union will meet in Brussels on Sunday to discuss coordinating responses to the financial crisis and Sarkozy said he would ask for an EU-wide car plan.

"I hope the Commission will react and understand that there are other things to do than working out whether state aid fits competition rules," he said.

Earlier this month Sarkozy faced criticism from his EU allies for a 6 billion euro ($7.64 billion) state loan offered to Renault and PSA Peugeot-Citroen in return for an unwritten pledge not to close production sites in France.

In the United States, the head of Chrysler LLC, which is seeking up to $5 billion in new aid on top of $4 billion of loans in December, met officials on Wednesday.

Ford executives met officials earlier this week and General Motors Corp bosses will meet them on Thursday.

DOUBLE STANDARDS

The EU's transport chief said on Thursday it would consider appealing to the WTO if U.S. aid made conditions unfair for European manufacturers, but he warned against double standards inside and outside the bloc.

"Europe is evaluating -- if that help should impinge on the competitiveness of our producers -- appealing to the WTO," European Transport Commissioner Antonio Tajani said in an interview with Italian paper La Stampa.

The EU car industry, which employs 2.3 million people directly and 10 million in related industries, has warned that output could fall by at least 15 percent this year and producers might need up to 15 billion euros in financial help.

EU competition authorities are scrutinising car industry support in France, Spain, Britain, Italy, Germany and Sweden.

"If we defend ourselves from this outside the EU, we can't permit it internally," said Tajani.

Leaders of the G20 developed and emerging countries agreed last year to fight protectionist tendencies which have arisen as countries try to defend their national interests during the financial crisis.

WTO chief Pascal Lamy on Wednesday urged G20 leaders not to backtrack on their commitment. (Additional reporting by Stephen Brown in Rome; Writing by Anna Willard; Editing by Estelle Shirbon and Mark Trevelyan)

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