FACTBOX-Subsidies and the WTO -- issue at heart of Airbus case

June 30 (Reuters) - Subsidies are at the heart of the case brought by the United States over EU funding for Airbus EAD.PA, in which a WTO panel gave a ruling on Wednesday.

* The WTO agreement on subsidies distinguishes between two categories: prohibited and actionable.

* Prohibited subsidies require recipients to meet certain export targets or use domestic goods instead of imported goods. They are prohibited in every case because they specifically aim to distort trade.

They can be challenged in the WTO’s dispute settlement system, where they are subject to an accelerated process.

If the WTO dispute panel confirms that a subsidy is prohibited, it must be withdrawn immediately, otherwise the complaining country can take counter-measures.

* In the Airbus case the WTO panel found that Airbus had indeed received prohibited export subsidies, and called for them to be withdrawn within 90 days.

* Actionable subsidies require the complaining country to show that the subsidy is hurting it, otherwise such a subsidy is allowed.

It defines three types of damage:

-- A subsidy can hurt domestic industry in an importing country;

-- It can hurt rival exporters trying to compete in third markets;

-- And it can hurt exporters trying to compete in the subsidising country’s domestic market.

If the WTO dispute system confirms that a subsidy is having an adverse effect, it must be withdrawn, or the adverse effect must be removed.

* In this case the WTO panel found that number of transactions, including some infrastructure spending and transfers of government stakes to other entities, amounted to subsidies, and that these subsidies had hurt Airbus's rival Boeing BA.N in European and third markets. It called for the subsidies or their adverse effects to be withdrawn.

* Other subsidies are allowed, and the poorest developing countries are exempt from the ban on export subsidies. (Source: WTO) (Compiled by Jonathan Lynn; Editing by Stephanie Nebehay/David Stamp) (For more on Airbus case click on [ID:nLDE65O1RU] )