By Adrian Croft
BRUSSELS, March 14 (Reuters) - A senior U.S. official warned on Tuesday that increasingly difficult economic and trade ties between the United States and Europe risked affecting their crucial political and security relationship.
Undersecretary of Commerce David Aaron delivered the blunt warning after a transatlantic dispute deepened over a planned European Union law to counter aircraft noise which Washington says discriminates against U.S. companies.
The United States said it would file a protest against the law on Tuesday at the International Civil Aviation Organisation (ICAO) after efforts to reach a compromise failed.
The row is one of a number of increasingly rancorous disputes between the United States and the 15-nation EU -- the world's leading commercial powers which also have close political and military ties.
They have clashed in high-profile trade disputes over EU banana import rules and its ban on the import of hormone-treated beef as well as U.S. tax breaks for exporters.
More recently, the Clinton administration effectively vetoed the EU's first choice as new head of the International Monetary Fund, German Deputy Finance Minister Caio Koch-Weser, before backing a second German candidate, Horst Koehler.
"I think we have a very difficult, increasingly difficult economic relationship and it threatens to spill over into our political and even our security relationship," Aaron told reporters in Brussels, referring to U.S.-European ties.
DISPUTES PILING UP
"We have more disputes this year on the table than we had last year. We had more disputes last year than the year before. They seem to be piling up without effective ability to fix them and that's a bad thing in a relationship that's so important," he said.
Stressing the size of transatlantic economic ties, Aaron likened them to finely-meshed gears. "Drop a little sand into the gears and they create enormous noise and ultimately (it) can create a lot of damage," he said.
He said the United States had always felt that security issues were immune from the transatlantic economic relationship, but, since the end of the Cold War, economic issues had grown in importance. "We fail to solve these problems at our peril," he said.
Aaron said he had felt the EU and the United States were very close to solving their dispute over the EU aircraft noise law, but his talks with EU Transport Commissioner Loyola de Palacio failed to reach an agreement on Monday.
The law would ban from 2002 all non-EU aircraft fitted with noise mufflers or "hushkits" that are not already flying in the bloc -- a move which the United States says would predominantly hit U.S. companies and manufacturers.
De Palacio told a committee of the European Parliament on Monday she could not recommend suspending the regulation. Her spokesman, Gilles Gantelet, said on Tuesday it appeared that the law would take effect as planned on May 4.
The United States and the EU had discussed a compromise under which the EU would move to suspend the air noise law, the United States would suspend its ICAO action and the two sides would draw up a joint position on a new generation of more stringent air noise standards.
The United States could accept most of the EU's proposals but insisted on formally filing its complaint with the ICAO before suspending it, something the EU found unacceptable.:
