EU open to talks with U.S. in aircraft subsidies dispute

By Alissa de Carbonnel and Andrea Shalal

BRUSSELS/WASHINGTON (Reuters) - The European Union said on Tuesday it was open to talks with Washington in a dispute over aircraft subsidies after the United States threatened an additional $4 bln in tariffs on EU goods including olives, Italian cheese and Scotch whisky.

Just days after reaching a truce in the U.S.-China trade war, the U.S. Trade Representative's office (USTR) opened the new front with Europe on Monday in the long-running dispute.

It added the list of additional products to $21 billion worth of EU goods that could be hit with tariffs announced in April - alarming industries on both sides of the Atlantic.

The EU hit back, saying the dispute should be adjudicated by the World Trade Organisation (WTO) and the United States could not make its own tally of potential hurt to calculate retaliation.

"The figures quoted by the USTR are based on US internal estimates that have not been awarded by the WTO," a spokesman for the EU executive said in an email.

The bloc said it remained opened to negotiations "provided these are without preconditions and aim at a fair outcome", but added it was also preparing to retaliate as soon as the WTO arbitrator had ruled on its rights to do so.

The United States and the EU have threatened to impose billions of dollars of tit-for-tat tariffs on planes, tractors and food in a nearly 15-year dispute at the WTO over aircraft subsidies given to U.S. planemaker Boeing Co (N:BA) and its European rival, Airbus SE (PA:AIR).

Airbus said the U.S. announcement was not helpful.

"This only adds to the trade tensions but in reality does not change anything. The level of retaliation is up to the WTO to define, not the USTR or Boeing," the company said in a statement.

"That is not creating a healthy environment for working toward a negotiated solution and risks a wide variety of industries on both sides of the Atlantic to arrive in a lose-lose situation."

Senior officials from Boeing and a U.S. aerospace trade group urged the U.S. government last month to narrowly tailor any tariffs imposed on the EU over illegal aircraft subsidies to avoid harming American manufacturers.

The latest tariff threats drew strong criticism from industry groups that stand to suffer.

The Scotch Whisky Association on Tuesday urged Washington and Brussels not to take steps that could jeopardize jobs and hurt consumers.

"Exports of Scotch Whisky to the US have been zero tariff for twenty years, so it is disappointing that Scotch Whisky has been drawn into this dispute," a spokesman for the association said after the U.S. Trade Representative's announcement.

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Sources familiar with the WTO cases said Washington's latest salvo appeared aimed at increasing pressure on the EU and hastening negotiations by hitting important agricultural products.

Washington had signaled its openness last month to working on an enforceable mechanism to govern government subsidies for aircraft production, potentially paving the way for an end to the aircraft subsidy fight.

One of the sources, however, said it had not received much of a reply, saying: "The EU has to understand that the United States is serious about imposing tariffs. The only way this is going to get resolved is through negotiation."

The 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.

It could rule as early as the second half of July about the level of appropriate retaliation in the case brought by the United States, said another source.

The USTR said it would hold a hearing on the proposed additional products on Aug. 5 and could immediately impose increased duties on the products included in the initial list, if the WTO arbitrator issued a decision before the public comment period ended on the supplemental list.