EU, US meet as fresh Airbus sanctions loom

(GENEVA) - US and European officials held crunch talks in Geneva on Friday, in an effort to stop a long-running aerospace trade war from escalating via fresh multi-billion dollar US sanctions against Europe.

Trade diplomats were hunkered down in the Swiss lake-side city, according to officials in Washington and Brussels, with the knowledge that failure could move US sanctions worth as much as $10 billion a year a step closer.

"The European Union and the United States are holding formal consultations in the Airbus case," said EU trade spokesman John Clancy, without commenting further.

The United States has accused European governments of failing to comply with a World Trade Organization ruling that called for Airbus launch subsidies to be cut by December last year.

"It was clear that the EU did not withdraw the subsidies in question and, in fact, granted new subsidies to Airbus' development and production of large civil aircraft," said US Trade Representative spokesman Andrew Mead.

"The United States remains prepared to engage in any meaningful efforts, including the consultations convening today, that will lead to the goal of ending subsidized financing at the earliest possible date."

The outcome of the meeting was not immediately clear.

But if no agreement is reached, Washington is likely to ask the WTO to review the EU's compliance package.

That would effectively mean the US asking permission to impose an estimated $7-10 billion (5.3-7.6 billion euros) in trade sanctions annually.

The talks are just the latest twist in a series of tit-for-tat sanctions in a long-running trans-Atlantic trade war over Boeing and Airbus.

A parallel EU complaint against US aid to Boeing is also winding its way through the WTO dispute process, with a possible ruling in February.

The cases were filed within an hour of each other in October 2004.

EU trade commissioner Karel De Gucht said in December that the EU and the US were "both guilty" in the affair as they had "both taken government action" to support their aircraft industries.