U.S. and EU again at odds over Airbus subsidies at WTO

By Tom Miles

GENEVA (Reuters) - The European Union told the World Trade Organization's dispute settlement body on Monday that it had acted within days of a WTO ruling to bring its funding of planemaker Airbus into line with WTO rules, a trade official who attended the meeting said.

The United States won a partial victory on May 15 against EU support for Airbus at the WTO, clearing the way for possible U.S. sanctions in a 14-year-old dispute over claims of illegal handouts for aircraft makers.

The EU said last week it had taken steps to comply with the WTO ruling on subsidies for its A350, Europe's newest long-haul jet, and the A380, the world's largest airliner, and reiterated its efforts at a closed-door WTO meeting on Monday.

The EU said it had made "contractual changes to the loan terms for the A380 and the A350XWB models of aircraft, where it was found that the repayable loans provided to Airbus for these aircrafts did not sufficiently reflect market conditions."

But a U.S. representative at the WTO meeting said it was hard to give credence to the EU's assertion, after four previous rulings that had disagreed with similar EU claims to have brought Airbus's financing into line with market benchmarks.

Under WTO rules, Washington could now ask the WTO to set a level of sanctions allowed against the EU.

"To be clear, the U.S. preferred outcome is a mutually agreed solution with respect to aircraft financing," the U.S. official told the meeting. "The United States remains ready to hold serious discussions to achieve this goal."

The United States is the target of a similar WTO complaint brought by the EU over U.S. support for Airbus's rival Boeing, and the EU has said it expects to land a similar legal blow later this year.

That could plunge the two sides into a tit-for-tat sanctions battle, or prompt what some trade experts have long expected: a trans-Atlantic deal on financing big civil aircraft.

The U.S. official said Washington wanted to agree a deal to avoid similar disputes over subsidies in future, although it was prepared to seek countermeasures on EU products if necessary.

"But in our view, what is needed to resolve this dispute is not more WTO litigation but a real desire to resolve this dispute," the U.S. official said.

An Airbus spokeswoman said the firm welcomed the U.S. proposal for a settlement, saying it would be a "wise way forward" and dismissing any grounds for U.S. countermeasures.

"Airbus and the EU have always been open to sit down and discuss a settlement with everything on the table and without any preconditions," she said.

"If that is the case, we are happy to start a constructive discussion to find a solution to this long lasting dispute."

(Reporting by Tom Miles, additional reporting by Tim Hepher; Editing by Stephanie Nebehay and Edmund Blair)