U.S. claims in Airbus dispute exaggerated, EU says

By Doug Palmer

WASHINGTON, July 23 (Reuters) - The United States has "vastly exaggerated" the amount of aid European governments have given to aircraft maker Airbus (EAD.PA), European Union trade officials said on Monday in a brief given to reporters.

"The U.S. is now seeking to argue that the benefit of MSF

(member state financing) alone amounts to as much as $205 billion and is actively trying to 'sell' this vastly exaggerated amount," the EU said in the brief.

"The U.S. magically reaches this 'estimate' by compounding interest on subsidies dating back as far as 1967."

Applying the same method, the EU could calculate U.S. support for Boeing Co. (BA.N) at $305 billion, instead of the $23.7 billion it has actually alleged, the EU said.

The accusation comes just before a World Trade Organization panel holds a second hearing this week on the United States' complaint against against EU "launch aid" loans to help Airbus develop new aircraft.

Washington contends they are an illegal subsidy under WTO rules, but the EU says the loan program is allowed under a 1992 bilateral civil aircraft agreement that the United States unilaterally abandoned in 2004.

Brussels also says the loan terms "in some cases ... are more onerous" than Airbus could obtain commercially.

A confidential interim ruling is expected in late October in the U.S. case against the EU, although it could be delayed if the panel decides it needs more time to make up its mind.

A separate WTO panel will hold its first hearing in late September in the EU's counter-complaint against U.S. federal, state and local subsidies for Boeing.

"The EU will demonstrate before the WTO panel that the lavish subsidies benefiting Boeing has allowed Boeing to engage in aggressive pricing of its aircraft which has caused lost sales, lost market share and price suppression to Airbus on a number of select markets," the EU brief said.

It will also show Boeing has received illegal export subsidies, and the United States has harmed EU interests "by violating the EU-US 1992 agreement," the EU said.

The high stakes dispute could lead to massive trade sanctions, if either Washington or Brussels is found in violation of global trade rules and refuses to comply.

But it could take another two years to reach that point. Both sides are expected to appeal any adverse ruling. If they lose again, they would be allowed under WTO rules a reasonable amount of time to comply, which is often is 15 months.

Although both sides have repeatedly said they are interested in a negotiated settlement, there are no active talks underway, U.S. officials said.

((Editing by Eric Walsh; Reuters Messaging: doug.palmer.reuters.com@reuters.net; e-mail: doug.palmer@reuters.com; +1-202-898-8341)) Keywords: USA EU/TRADE

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