US, EU threaten tariffs amid Airbus, Boeing dispute

U.S. Trade Representative is proposing additional duties to be imposed on a list of EU-made products, including Airbus aircraft, to compensate $11.2 billion the U.S. allegedly loses annually. European Union is expected to respond in the same manner.

Airbus and Boeing, backed by the European Union and the United States accordingly, are engaged in a 14-years strong trade dispute, with claims and counterclaims circling the World Trade Organization for years now. In the newest chapter of the conflict, both conflict sides are now threatening tariffs for abroad-made large civilian aircraft.

U.S. arranging tariffs on Airbus aircraft

On April 8, 2019, the United States Trade Representative said it began the process of imposing additional tariffs on a list of EU-made products including large civilian aircraft (hint: Airbus) and their parts. So far, the list is “preliminary”.

If imposed, the additional duties would be applied until “the EU removes those subsidies,” according to a statement by USTR. “Our ultimate goal is to reach an agreement with the EU to end all WTO-inconsistent subsidies to large civil aircraft,” said U.S. Trade Representative Robert Lighthizer. “When the EU ends these harmful subsidies, the additional U.S. duties imposed in response can be lifted”.

The subsidies in question are those  Airbus is receiving from EU governments, as the World Trade Organization (WTO) has deemed. The United States holds that these subsidies are much higher than the ones Boeing receives from the U.S., as the WTO has also determined.

The additional duties are proposed as “countermeasures” to effects caused by EU subsidies. In USTR estimations, they are worth $11.2 billion per year.

EU to retaliate?

The USTR announcement was met with criticism in the EU. “We do not see any legal basis for that. Airbus took the necessary steps to comply with the relatively minor elements that remained […] with regard to Airbus subsidies,” said Airbus spokesman Rainer Ohler.

Airbus is also skeptical about the proposed amount. “The amount is largely exaggerated and will, in any case, be defined by the WTO and not by the United States,” according to Ohler.

In response to the USTR move, the European Union is reportedly preparing counter-measures against Boeing and its U.S. subsidies. European Commission finds the U.S. proposal “greatly exaggerated” and is preparing its own list of products, which, likewise, include large commercial aircraft (hint: Boeing) and parts, Reuters reported on April 9, 2019, quoting a “source” inside the Commission.

“The interest of the United States as the interest of the European continent and France is to reach an amicable agreement,” said French Minister of the Economy Bruno Le Maire. “When I see the global growth situation, I do not think we can afford a trade dispute, even in the aviation industry alone, between the United States and Europe”.

In both cases, a WTO arbitrator is to evaluate claims.

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