EU underscores desire to settle aircraft subsidy issue with U.S.

By Andrea Shalal

WASHINGTON (Reuters) - The European Union on Wednesday emphasized its desire to negotiate an end to a longstanding dispute with the United States over aircraft subsidies even as Washington raised duties on Airbus <AIR.PA> aircraft by 50%.

European Trade Commissioner Phil Hogan underscored the EU's desire to negotiate a settlement when he spoke with the top U.S. trade official on Monday, two days before the tariff increase went into effect, an EU spokesman said.

"The EU had made concrete proposals related to existing subsidies and future disciplines in this sector and the Commission negotiating team will follow up actively with their U.S. counterparts in the coming days," the spokesman said.

The U.S. government on Wednesday cast aside concerns about the impact of higher tariffs on U.S. airlines already hammered by a drop in air traffic due to the coronavirus outbreak, and proceeded to hike duties on EU-built aircraft to 15% from 10%.

The tariff increase will not be paid by Airbus, but by U.S. airlines.

A spokesman for U.S. Trade Representative Robert Lighthizer had no immediate comment on the EU statement, or the timetable for further talks on the issue.

Washington is trying to pressure the EU to comply with a World Trade Organization ruling on illegal aircraft subsidies, and Brussels has threatened to respond in kind once the WTO rules on a parallel case challenging U.S. government aid to U.S. planemaker Boeing <BA.N> later this spring.

Airbus spokesman Clay McConnell in Washington urged the U.S. government to work out an agreement with the EU and end a dispute over aircraft subsidies that dates back over 15 years, underscoring the global impact of the coronavirus pandemic.

Major U.S. airlines are seeking more than $50 billion in government help as part of a White House financial assistance package, while Boeing has asked for a $60 billion lifeline for the struggling U.S. aerospace manufacturing industry, which faces huge losses from the coronavirus pandemic.

USTR on Tuesday said it continued to seek a negotiated outcome and hoped the additional duties would spur Brussels to halt illegal government subsidies to Airbus.

The Eurasia Group on Wednesday said it did not expect the situation to escalate into a full-blown trade war.

"Officials on both sides of the Atlantic are currently focussed on battling the coronavirus, which will also dampen the appetite in both the US and the EU to engage in a tit-for-tat tariff fight," the group said.

(Reporting by Andrea Shalal; editing by Diane Craft)