WTO: EU can slap $4B in tariffs on US goods

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A Boeing 737 MAX jet underwent a test flight overseen by the Federal Aviation Administration last month. AFP

The World Trade Organisation (WTO) ruled on Tuesday that the EU could impose tariffs worth $4.0 billion on US imports in retaliation for illegal US aid to plane maker Boeing, a year after the EU was sanctioned for its support of Airbus.

The decision was the latest development in a 16-year saga between Washington and Brussels over support for their leading civil aircraft manufacturers.

 

The WTO determined that that amount was “commensurate with the degree and nature of the adverse effects determined to exist” from US support for Boeing considered to be in violation of international trade rules, according to the 121-page arbitrator’s report.

According to a list of targets seen by AFP, the EU is expected to impose tariffs on aircraft made in the US, along with tractors, sweet potatoes, peanuts, frozen orange juice, tobacco, ketchup and Pacific salmon.

The EU’s top trade official signalled a preference for avoiding new tariffs, calling instead on Washington to withdraw US levies on European goods after the WTO last year authorised a record $7.5 billion in US sanctions against European goods.

Washington then imposed punitive tariffs of 25 per cent on EU products such as wine, cheese and olive oil. A 10 per cent tariff on Airbus planes was hiked to 15 per cent in March.

“I have made it clear that my strong preference is for a negotiated settlement with the US, avoiding harmful rounds of measures and countermeasures,” EU executive vice-president Valdis Dombrovskis said.

“Our suggestion is that the US withdraws the tariffs they imposed as a consequence of the Airbus ruling,” the former Latvian prime minister added.

 

US Trade Representative Robert Lighthizer on Tuesday said the US would “intensify” talks to find a resolution to the longstanding dispute.

“The United States is determined to find a resolution to this dispute that addresses the massive subsidies European governments have provided to Airbus and the harm to US aerospace workers and businesses,” Lighthizer said.

“We are waiting for a response from the EU to a recent US proposal and will intensify our ongoing negotiations with the EU to restore fair competition and a level playing field to this sector.”

Lighthizer said the ruling clearing the way for $4 billion in EU tariffs on US goods had “no valid basis” because it was based on a tax provision by Washington state, where Boeing is based, that had been repealed earlier this year.

Following Tuesday’s decision, the EU must request permission from the Dispute Settlement Body (DSB) to apply the decision – something it could do at the body’s next meeting on October 26, a week before the US presidential election.

While several EU leaders have been calling for imposing the tariffs immediately if Washington does not agree to drop its levies, few expect it to do so.

One industry source however expects the WTO ruling to “open the door for negotiations”.

Given the crisis the airline industry now finds itself in and the effect that is having on Airbus and Boeing, a long drawn-out battle in which tariffs raise the prices of aircraft does not serve the interests of either the EU or the US.

Airbus was among those calling for a settlement.

“It is time to find a solution now so that tariffs can be removed on both sides of the Atlantic,” said Airbus CEO Guillaume Faury.