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EU Growing Concerned About New US Tariffs

Sept. 17, 2019
The World Trade Organization reportedly will allow import penalties up to $11 billion/year on aircraft and aerospace goods, as a result of Airbus subsidies

The European Union’s Trade Commission is raising concern of an escalated trade war with the United States following news that a World Trade Assn. review committee has ruled the U.S. may impose tariffs on EU manufactured goods, reportedly up to $11 billion/year. The decision stems from the long-running impasse concerning state subsidies to Airbus.

The WTO decision reportedly sets the amount of the tariffs that the U.S. may demand on EU imports. The confidential ruling was sent to the European Commission and the U.S. Trade Representative late last week, according to reports.

Both the U.S. and EU have been found guilty by the WTO in the past of subsidizing Boeing Co. and Airbus, but the most recent ruling refers only to the EU’s Airbus subsidies and the U.S. petition to penalize EU manufactured goods as a consequence.

A separate ruling concerning EU penalties on U.S. manufactured goods is expected early next year, and could rise up to $12 billion/year.

According to EU Trade Commissioner Cecilia Malmstrom, the U.S. has rejected EU proposals for a settlement of the cases. “We have enough tariffs in the world as it is,” Malmstrom reportedly said, “so imposing tariffs on each other … would not be a good solution.”

“What the United States is seeking is an end to subsidies for Airbus and the recovery of damages,” according to a spokesperson for U.S. ambassador Gordon Sondland.

The new tariffs are likely to undermine the efforts to improve U.S.-EU trade relations after last year’s flare-up involving import duties on steel and aluminum, which was followed by European retaliation.

In the current case, the U.S. asked WTO permission to impose tariffs up to 100% on European goods worth $11.2 billion a year, including aircraft and aerospace parts from the U.K., France, Germany, and Spain. Some food and luxury goods also would be penalized.

The U.S. and the EU have been battling over subsidies to (respectively) Airbus and Boeing for more than a decade. Both sides have "won" rulings from WTO, but the allegations of subsidization have increased in recent years as the two manufacturers developed new models and set up new production programs.

Last year WTO issued a final ruling in favor of Boeing concerning EU subsidies for the A350 and A380 commercial jet programs. According to that decision, the EU failed to honor multiple previous rulings and illegally subsidized Airbus with more than $22 billion over more than a decade.

WTO ruled then the EU must end the subsidies and address the damage resulting since 2006, when the suit was initiated by Boeing.

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