The United States pressed the European Union on Friday for hard evidence that it has complied with a trade ruling on subsidies to planemaker Airbus
Officials from both sides said they had met in Geneva to review the EU's response to a ruling by the World Trade Organization that it gave billions of dollars of unfair aid to Airbus, harming the interests of rival Boeing Co
The EU's trade spokesman confirmed the two sides had held formal consultations but gave no further comment.
The EU said last month that it had complied with the request to repair European government loans deemed to contain subsidies, but it has not detailed its response to the 1,000-page trade ruling in as much depth as its opponents would like.
Speaking during the Geneva meeting, a senior U.S. administration official said that if the EU did not show proof that it had rolled back subsidies to Airbus, Washington could invoke the next stage in the global trade body's procedures, which would involve setting up a group to examine EU compliance.
Once that was exhausted, the EU could face damages arbitration and eventually sanctions, U.S. officials say.
The EU is awaiting the results of an appeal in a countercase in which the WTO found that the United States had also given unfair aid to Boeing through research or tax arrangements.
The two sides have squabbled for years over mutual accusations of aid to their aircraft industries -- which involve several hundred thousand jobs including suppliers -- and cannot even agree over the scope of their dispute.
Washington wants Airbus to back down from using government loans for its next aircraft, the A350; but the EU says it is not covered by the case, and any loans would comply with WTO rules.
Due to be delivered later this decade, the A350 competes against Boeing's carbon-composite 787 Dreamliner.
Speaking to analysts last month, the chief executive of Airbus parent EADS
We have already sold 570 A350s; it means the risk is much more limited than at the beginning of the program and perhaps ... we have to look at your question to see if now there are not more advantages to investing our cash in the A350 development instead of getting reimbursable loans. That is clear; that is a question, CEO Louis Gallois said.
For the time being we have chosen to stick to reimbursable loans, which are not unfair subsidies because there is absolutely no subsidy content in them, and that has been recognized by the WTO, and we don't want to lose this instrument, because we could need it in the future, he said, according to a recording released on the EADS website.
Airbus officials say the loan system was not itself faulted by the WTO and will be used for the A350 on WTO-compliant terms. Boeing says that every jet developed by Airbus has benefited from flawed loans and that only abolishing them would be sufficient.
(Reporting by Tim Hepher; Editing by Gerald E. McCormick)