Washington hopes a WTO report on EU subsidies for Airbus will help resolve a row over U.S. and European support for their rival aircraft industries, U.S. Trade Representative Ron Kirk said.

Kirk said in an interview in Brussels that the U.S. would prefer a negotiated settlement to its long-running row with the European Union but the two sides would have to agree to play by the rules.

The confidential World Trade Organization report urged the EU to end what it called illegal subsidies given to Airbus.

The report concerns just one of two cases in the trade dispute also involving Airbus' rival Boeing in the multi-trillion-dollar aircraft market.

"If the rulings create a more favourable environment for us to come to the table and negotiate such a settlement, I think that is to the best interest of the United States and the European Union," Kirk told Reuters. The WTO's Airbus report will not be published for several weeks or months as it awaits translation into French and Spanish, while its ruling on Boeing is due by late June.

EU Trade Commissioner Karel de Gucht, speaking to journalists in Warsaw echoed his U.S. counterpart, saying that he foresaw a negotiated settlement as a possible political and economic solution to the dispute.

"I think we will end up in a negotiation between the Commission and the American government. But you can only negotiate on the basis of a full overview of the (two) inquiries," de Gucht said.

Kirk said clear rulings in these cases would guide not only the United States, but also the 27-country EU to a more balanced and WTO-compliant level of support for the industry.

The dispute has heightened trade tensions between the United States and the EU, its number one export market. Bilateral goods and services trade totalled nearly $1 trillion in 2008, or about $3 billion a day.

Kirk, visiting Brussels to meet EU officials and scheduled to meet de Gucht, said it would be detrimental to businesses on both sides of the Atlantic if the row dragged on.

"My preference is always to solve problems sooner rather than later because most of our businesses can't survive a 14-year dispute," he said.

Kirk rejected EU allegations that Washington was sliding towards protectionism, arguing that the United States continued to run a huge trade deficit.

Last week, the EU's trade chief said he wanted more engagement from the United States to restart global trade talks and ease fears of U.S. protectionism.

"I think we have to be careful when we throw around terms like protectionist, particularly with strong partners with such mutual interests as we have between the EU and the United States," Kirk said.

Keeping China Engaged

Kirk said it would be in the interests of the transatlantic partners to move away from their bilateral disputes and keep China engaged in liberalising its market.

He reiterated U.S. calls for Beijing to allow its yuan currency to rise.

"Where we have been most successful in many cases in getting China to seriously consider our concerns and change their behaviour, we had done so in concert with the European Union, Canada, Mexico, Australia.

"I believe that it is going to require all of us collectively to work with China to help them understand how much we will all benefit in allowing the free market to help grow China's economy," Kirk said. (Reuters)