EU in secrecy spat with US over A350 funding papers

By Sebastian Moffett

BRUSSELS, Oct 8 (Reuters) - The European Union accused theUnited States of breaching confidentiality surrounding thefiling of economically sensitive documents on the funding of theAirbus A350 in the latest twist to a long-runningaircraft subsidy dispute.

The EU's executive Commission spoke out on Monday after theU.S. Trade Representative's office confirmed a Reuters reportthat it had received the documents after requesting them fromthe World Trade Organization over a month ago.

It is the first time the funding of the A350 - Europe'sanswer to the Boeing 787 - has been drawn directly intothe world's largest trade dispute and comes at a sensitive timeas Airbus parent EADS prepares to expand in the United States.

"The EU regrets that the US government has disregarded theconfidentiality of WTO proceedings by referring to the EU'ssubmission of documents last week," EU Trade Spokesman JohnClancy said, in a rare criticism of the United States forflouting secrecy protocol.

A U.S. embassy spokeswoman in Brussels declined comment.

Washington has called on Airbus to stop receiving loans fromits host European nations - Britain, France, Germany and Spain -and argues that the WTO should take loans for the future A350into account when evaluating penalties for earlier support.

The EU says the A350 is outside the scope of the subsidydispute which was set up before the European planemaker decidedto launch the aircraft, due to make its maiden flight in 2013.

The WTO has found that Airbus and U.S. rival Boeing bothbenefited from billions of dollars of unfair subsidies in a pairof trade complaints now in their ninth year.

The clash over the A350 risks an escalation of the marathondispute just as Airbus parent EADS prepares to seek U.S. backingfor a potential merger of EADS with Britain's BAE Systems, which has significant interests in the United States.

The $45 billion merger would be subject to thorough vettingby U.S. authorities, including the U.S. Trade Representative'soffice, and is expected to draw close scrutiny from Boeing

and its supporters in Congress.

Critics of EADS fear the combination of BAE's extensive U.S.operations and suspected ongoing subsidies to Airbus might givethe group unfair pricing power and damage the U.S. industry.

But most trade specialists doubt the WTO dispute will bedrawn into the merger approval process because the panel whichvets such moves, the Committee on Foreign Investment in theUnited States, generally sticks to a pure security mandate.

A U.S. source said outside estimates placed the loans paidto Airbus for the A350 at around $4.5 billion.

Airbus has said any payments would comply with WTO findings.

The two sides have been engaged in legal trench warfare overaircraft subsidies for over eight years, with testimony, rulingsand appeal verdicts running to thousands of pages.

After a protracted legal battle over the status of theplane, the U.S. government said on Saturday it had received EUdocuments on the A350 a month after requesting them.

The EU spokesman said the Geneva-based WTO had asked for thedocuments merely to decide whether they were relevant.

The United States seeks up to $10 billion in sanctionsagainst the EU for not eliminating European government supportmainly in the form of government loans to Airbus.

The EU last month asked the WTO for the right to imposesanctions worth up to $12 billion annually in the largest eversanctions request, triggered by research aid to Boeing.

Analysts say it could be years before the huge dispute playsitself out in sanctions or a settlement, while hanging overU.S.-European relations as a sporadic irritant in other issues.

(Editing by Tim Hepher and Hans-Juergen Peters)

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Keywords: TRADE AIRBUS/A350