WTO says EU failed to rein in Airbus subsidies

By Features Reuters

The World Trade Organization said on Thursday the European Union had failed to rein in billions of dollars in subsidies to planemaker Airbus , prompting Washington to call for an immediate halt to support to unwind damage to U.S. jobs.

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The ruling is part of a series of tit-for-tat transatlantic complaints about aircraft subsidies that together make up the world's largest trade dispute, still raging after 12 years of bitter arguments.

The WTO said the EU had failed to comply with earlier rulings by the global trade body against all but two of 36 contested measures, including billions of dollars of European government loans to Airbus stretching back decades.

The loans were a "genuine and substantial" cause of significant lost sales for its U.S. competitor Boeing, it said.

In a blow to Europe's long-held argument that the most recent Airbus plane, the A350, fell outside the case, the WTO said funding for the jet had been subsidized but rejected U.S. claims it fell into the most toxic category of "prohibited" aid.

The United States said Airbus had failed to undo subsidies worth $22 billion, including $4 billion for the A350.

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European industry officials dispute those numbers, saying they overstate the amount of support at stake within the loans.

U.S. Trade Representative Michael Froman said the subsidies had cost U.S. workers exports worth tens of billions of dollars.

"We expect the EU, Germany, France, the United Kingdom, and Spain ��� some of our closest trading partners ��� to respect WTO rules. We call on them to end subsidized financing of Airbus immediately," he said in a statement.

The EU, however, suggested it would appeal the latest findings, saying it found some of the report "unsatisfactory".

"We are closely analysing the report," the European Commission said, adding the 574-page document should be read in the context of two other WTO reports expected to address U.S. subsidies to Boeing in coming months.

It comes amid a U.S. presidential campaign where claims that U.S. companies are suffering from alleged cheating by foreign competitors is a prime topic for both candidates, and amid growing support for protectionism on both sides of the Atlantic.

In earlier findings, the WTO ruled that both Airbus and Boeing received unfair subsidies worth billions of dollars.

Both sides have sought WTO permission to draw up sanctions that could penalize other industries, with the U.S. calling for up to $10 billion in counter-measures and the EU $12 billion.

But no reprisals are expected until the WTO process, which is already running about three years behind schedule, has been exhausted, which trade sources say could take months or years.

Many analysts expect a negotiated settlement instead.

(Story refiles to remove extraneous word in paragraph six.)

(Additional reporting by David Lawder and Alwyn Scott; Writing by Tim Hepher; Editing by Mark Potter)