U.S. threatens EU with tariffs on products over aircraft subsidy dispute

U.S. President Donald Trump said Tuesday the United States is planning to impose tariffs on $11 billion worth of products from the European Union over the protracted bilateral dispute over aircraft subsidies.

“The World Trade Organization finds that the European Union subsidies to Airbus has adversely impacted the United States, which will now put Tariffs on $11 Billion of EU products!” Trump said on Twitter. “The EU has taken advantage of the U.S. on trade for many years. It will soon stop!”

Trump’s posted his tweet a day after the Office of the United States Trade Representative (USTR) issued a statement saying it has begun a process under Section 301 of the Trade Act of 1974 “to identify products of the EU to which additional duties may be applied until the EU removes those subsidies.”

The USTR said it was releasing for public comment a preliminary list of EU products to be covered by additional duties. “In line with U.S. law, the preliminary list contains a number of products in the civil aviation sector, including Airbus aircraft,” the statement said.

According to USTR, the products that will potentially be subject to the additional tariffs also include commodities such as a variety of seafood, dairy products, processed fruits, wine, garments, among others.

“This case has been in litigation for 14 years, and the time has come for action. The Administration is preparing to respond immediately when the WTO issues its finding on the value of U.S. countermeasures,” said U.S. Trade Representative Robert Lighthizer.  “Our ultimate goal is to reach an agreement with the EU to end all WTO-inconsistent subsidies to large civil aircraft.  When the EU ends these harmful subsidies, the additional U.S. duties imposed in response can be lifted.”

He said the Trump administration “is preparing to respond immediately when the WTO issues its finding on the value of U.S. countermeasures,” expecting the result of the WTO arbitration this summer.

Financial Times quoted an EU official as saying that the $11-billion figure “is based on US internal estimates that have not been awarded by the WTO” and is “greatly exaggerated.”

“The EU will request the WTO-appointed arbitrator to determine the EU’s retaliation rights,” the official said. “The commission is starting preparations so that the EU can promptly take action based on the arbitrator’s decision.”

Washington and Brussels have locked themselves in a bitter dispute settlement process at the WTO since 2004, featuring tit-for-tat appeals and counter-appeals against each other.

As the United States accuses the EU of subsidizing Airbus and the EU challenges the United States for illegally aiding Boeing Co with $19 billion in unfair subsidies between 1989 and 2006.

According to the WTO’s March 2012 ruling, at least 5 billion dollars’ worth of U.S. subsidies to Boeing were illegal. The United States was subsequently instructed to scrap them.

In June 2017, the WTO issued a ruling agreeing with the EU that the United States had not fully complied with the 2012 request asking it to remove the subsidies, citing the case of Washington state’s tax breaks.

The USTR claimed that a WTO appellate report in May 2018 found that “EU subsidies to high-value, twin-aisle aircraft have caused serious prejudice to U.S. interests,” and that the EU’s launching aid to Airbus’ A350 XWB and A380 caused “significant” lost sales and lost market for Boeing.

On May 15, 2018, The European Commission issued a press release, which quoted European Trade Commissioner Cecilia Malmstrom as saying that the appellate report “has definitively rejected the U.S. challenge on the bulk of EU support to Airbus,” adding that the EU “will now take swift action to ensure it is fully in line with the WTO’s final decision in this case.”

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Foreign Policy News is a self-financed initiative providing a venue and forum for political analysts and experts to disseminate analysis of major political and business-related events in the world, shed light on particulars of U.S. foreign policy from the perspective of foreign media and present alternative overview on current events affecting the international relations.

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