In a new development of a decade long dispute, the World Trade Organization (WTO) officially authorized the United States to impose tariffs on $7.5 billion of imports from the European Union because of subsidies granted to Airbus. The European Commission urges Washington to start negotiations and reach a settlement instead.
Since 2004, the United States and the European Union have been accusing each other of providing illegal public aid to their respective aircraft manufacturers, Boeing and Airbus. The WTO has ruled that both manufacturers have been receiving unfair subsidies. The EU was found to have unfairly supported the development of two Airbus programs, the late A380, and the A350. As for Boeing, the manufacturer received unjustified tax breaks from the U.S. authorities. Both parties estimate that subsidies harmed their business by more than $10 billion per year.
Early in October 2019, a WTO arbitrator had given the U.S. the right to apply a sanction of $7.5 billion on the E.U. ‒ a record high number in the history of the organization. However, the decision had yet to be approved by the Dispute Settlement Body (DSB).
Now that the DSB gave its green light, Washington will be able to apply the sanctions aimed principally at “Airbus countries”, namely the United Kingdom, France, Germany, and Spain. They were outlined by the Office of the U.S. Trade Representative in two lists, one published on April 12, 2019, and the second on July 5, 2019. They include a 10% tariff on Airbus planes, but also 25% on several other Europeans products that range from Scottish whisky to copper and iron.
“We expect customs sanctions to come into effect on Friday, and we have four more days ahead” to dissuade Washington from imposing customs sanctions, said European Commissioner for Trade Cecilia Malmström during a press conference following the announcement. She wrote a letter to U.S. Trade Representative Robert Lighthizer on October 11, 2019, urging him to work towards a settlement.
If negotiations fail, the E.U. will have to wait until spring 2020, when the WTO could authorize similar sanctions against the U.S. for the tax breaks it unfairly granted to Boeing.