June 18, 2019 / 1:39 PM / in a month

Exclusive: U.S. seen open to mechanism to end aircraft subsidy fight - sources

PARIS (Reuters) - The United States is expected to be open to negotiations on an “enforceable mechanism” that could allow European planemaker Airbus to receive government funding on commercial terms and ease the risk of tit-for-tat sanctions, two U.S. sources said.

An Airbus A350-1000 taxies during the 53rd International Paris Air Show at Le Bourget Airport near Paris, France, June 17 2019. REUTERS/Pascal Rossignol

Such a deal would also include moves by the United States to address tax incentives provided by Washington state to Boeing and make them compliant with trade rulings, as part of a possible new framework for aircraft industry funding, they said.

The comments are among the first indications of a possible path to a deal to end a 15-year-old transatlantic trade dispute over mutual claims of illegal subsidies, which have brought the United States and European Union to the brink of a tariff war.

The World Trade Organization (WTO) has found that the world’s two largest planemakers received billions of dollars of harmful subsidies in a pair of cases marking the world’s largest ever corporate trade dispute, consuming thousands of pages.

The United States has threatened to impose billions of dollars of tariffs against goods from the European Union, while the EU has warned of counter-tariffs in a parallel case running about 9 months behind the timetable for U.S. sanctions.

The WTO is expected to rule on the U.S. sanctions request over the summer, though the date could slip to September.

“It may be possible to create a mechanism for legal government funding, but which must be commercial and enforceable,” one of the U.S. sources said, adding such a step could only be taken if the EU demonstrated a “serious” commitment to tackling the dispute.

At the same time, the United States would be very likely to insist on some remedy for what it believes are billions of dollars of harmful subsidies received by Airbus in the past.

“If you have a new set of rules, but they are not enforced, what have you actually achieved?” the source said.

“There’s no question that the solution is for the Europeans to negotiate a resolution with the U.S. rather than allow this to escalate into additional rounds of tariffs that disrupt — instead of enhance — a free and fair international trading system,” said Eric Fanning, president of the Aerospace Industries Association, which represents U.S. aerospace firms.

Western officials who have tried to explore a compromise in the past believe any new funding agreement must set an example for China, whose own rapid aerospace growth with state backing is viewed as a worrying threat by the two Western giants.

Any resolution to the dispute that has been weighing on Airbus and Boeing for over a decade must be decided by governments rather than the companies, and depends on a positive signal from the European side, the sources said.

“It is now a matter for governments,” the other source said.

Boeing declined to comment. A spokeswoman for Airbus said earlier the company had repeatedly called for discussions to end the marathon dispute.

Additional reporting by Eric M. Johnson; Editing by Mark Potter and Phil Berlowitz

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