US threatens EU with new tariffs over Airbus subsidies

File photo. The first Airbus A380 is delivered to All Nippon Airways (ANA), the largest airline in Japan, on the tarmac of the Airbus delivery center in Colomiers, near Toulouse, southern France, 20 March 2019 [Frederic Scheiber/EPA/EFE]

The US on Monday (8 April) threatened to impose tariff counter-measures of up to $11.2 billion on a host of European products, including cheese and wine, in response to subsidies received by aircraft maker Airbus.

For more than 14 years, Washington and Brussels have accused each other of unfairly subsidising Boeing and Airbus, respectively, in a tit-for-tat dispute.

In a statement Monday, the office of the US Trade Representative (USTR) said the World Trade Organization (WTO) had repeatedly found that European subsidies to Airbus have caused adverse effects to the United States.

WTO requests final fix in EU-US aircraft subsidy war

The World Trade Organisation (WTO) released a final ruling on Thursday (28 March) saying the US and Boeing have complied with all but one subsidy complaint in a dispute with Europe over aircraft subsidies.

“This case has been in litigation for 14 years, and the time has come for action,” said US 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 US duties imposed in response can be lifted.”

The statement added that the final amount it would seek in duties was subject to arbitration at the WTO, the result of which was expected in the summer.

US to press WTO to enforce ruling on Airbus subsidies

The Obama administration said Monday (3 October) that it will press the World Trade Organisation to enforce a panel report that found the European Union guilty of maintaining illegal subsidies to Airbus.

The USTR’s preliminary list extends to 14 pages and contains a number of products in the civil aviation sector, including Airbus aircraft.

It also contains food products such as swordfish, salmon, cheeses, fruits, olive oil and wines, along with clothes.

Complicated trade spat

The Boeing-Airbus spat is the longest and most complicated dispute dealt with by the WTO, which aims to create a level playing field in global trade.

Both Airbus and Boeing have scored points along the way.

The WTO ruled in March 2012 that billions of dollars of subsidies to Boeing were illegal and notified the United States to end them.

But a few months later, the European Union filed a new complaint, alleging Washington was not complying with that order.

In a ruling published in June 2017, the WTO said the US had brought 28 of 29 programmes into compliance, but agreed with Brussels that Washington had not taken “appropriate steps to remove the adverse effects or… withdraw the subsidy” in the case of Washington state.

The EU and the US appealed against that to the WTO Appellate Body, which on last month echoed the 2017 finding, although it appeared to take a harsher line against the American side.

The EU was also reprimanded by the WTO during the tit-for-tat conflict between Airbus and Boeing, and the US asked the WTO to determine the amount it could impose in sanctions against the European Union for failing to comply in removing subsidies.

The USTR said Monday that once that report is issued, it will announce a full product list, which comes after months of trade tensions between the US and the EU.

US President Donald Trump’s administration has made punitive tariffs something of a signature, imposing many and frequently threatening them as a negotiation tactic: and the EU was no exception.

The EU and the US have been working to set in motion a limited trade pact as part of a truce agreed in July when Trump and European Commission President Jean-Claude Juncker pledged no new tariffs following those imposed on steel and aluminium.

The USTR’s statement also comes as Boeing faces a crisis over its 737 MAX aircraft, which is grounded over safety fears following two fatal accidents.

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