updated 5/9/2006 5:03:53 PM ET 2006-05-09T21:03:53

The World Trade Organization set up a panel on Tuesday to examine what the United States claims are further examples of illegal support by European governments for airplane-manufacturer Airbus.

The United States, in asking the WTO to open the formal investigation, said Airbus had benefited from millions in illegal launch aid, development financing, contributions and debt relief from the 25-nation European Union and its member states.

The EU had blocked Washington's first request for a panel, but cannot block it now that the United States has made a second demand.

The new panel is the latest step in a complex dispute, which started when the United States filed a WTO complaint against Airbus aid in 2004, and Brussels retaliated with a countersuit targeting subsidies to Chicago-based Boeing Co.

The U.S. says European government subsidies have distorted market prices and allowed the France-based manufacturer of jetliners to overtake Boeing as the biggest civil aircraft seller. The EU argues that the United States provides vast amounts of hidden support to Boeing through military contracts.

Airbus is 80 percent owned by EADS NV, Europe's largest aerospace firm.

The WTO set up two panels in July to investigate the competing claims of wrongdoing. It created a third in February after Brussels said the United States failed to cooperate in providing information on 13 government subsidy programs that Washington argued were outside the scope of the investigation.

Tuesday's panel, now the fourth in what is widely expected to be the most complicated and costly dispute in the 11-year history of the commerce body, will investigate subsidies either left unmentioned in Washington's request last year or only introduced by EU governments after July.

In February, U.S. Trade Representative Rob Portman said a new $9.2 million grant by the Welsh Assembly to help train new workers for the Airbus A350 — a mid-sized jet aimed at competing with Boeing's 787 Dreamliner — is effectively a new subsidy to the plane maker and supplements launch aid subsidies already announced by European Union member states.

The A350 is set to enter service in 2010, two years after the Boeing plane.

The EU said it was regrettable that the U.S. was making allegations based on "a perceived threat of subsidization," noting that European governments have yet to commit on investing in the A350 project.

"No such alleged support exists for the A350, neither at the time the U.S. asked for additional consultations on this matter, nor today," the EU said. It added that WTO rules do not "entail a right for the U.S. to use the dispute settlement system for purely speculative claims."

Earlier this month, Boeing Chairman and Chief Executive Jim McNerney said the prospect of a negotiated settlement to the trans-Atlantic trade dispute has improved, citing better dialogue between the two governments.

EU Trade Commissioner Peter Mandelson has said it could take "years to resolve" the standoff.

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