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After 15-year skirmish, US is cleared to impose tariffs on EU

18/09/2019

It will clear the way for the United States to impose tariffs on European goods, worsening tensions that have become strained under President Donald Trump's confrontational approach

The World Trade Organization will grant the United States permission to impose tariffs on the European Union as part of a prolonged scuffle over subsidies given to European plane-maker Airbus, European officials said Monday, a move that is likely to exacerbate trade tensions across the Atlantic.

The ruling, to be published in the week of Sept. 30, is the global trade body’s final decision in a 15-year-old dispute over the government assistance that Europe provides to its major plane manufacturer. It will clear the way for the United States to impose tariffs on European goods, worsening tensions that have become strained under President Donald Trump’s confrontational approach.

The WTO still must authorize a specific dollar amount that the United States can recoup through tariffs. But the U.S. trade representative has already prepared two lists of up to $25 billion worth of products that it can tax, including airplanes, fish, wine, leather purses, carpets and clocks.

The trade body opened the door for the Trump administration to impose billions of dollars in retaliatory sanctions in May, when it ruled that Europe had illegally subsidized Airbus to the detriment of its American competitor Boeing.

The ruling could become fodder for Trump’s growing trade fight with the European Union, which he has accused of weakening its currency and criticized for exporting more goods into the United States than it buys.

In retaliation for the harm Europe’s trade actions have caused the U.S. economy, the United States is proposing putting tariffs on a wide variety of European products, including helicopters, airplane fuselages, Parmesan cheese, olives, wine, handbags, sweaters, glassware, clocks, Irish and Scotch whisky, and copper alloys.

The U.S. Trade Representative held hearings in May and August to allow companies and groups that might be affected by the tariffs to plead their case, and the final list could change. The Trade Representative is expected to release the final list after the WTO announces its official decision.

Trump has already rankled European leaders by imposing tariffs on steel and aluminum imports and threatening to tax European automobiles before the end of the year. His administration’s attempt to negotiate a trade deal with the bloc has also faltered as the two sides continue to disagree about which industries, like agriculture, should be included in any deal.

The Airbus ruling threatens to set off a tit-for-tat tariff exchange between the two major trading partners that may further weigh on trans-Atlantic business and global economic growth.

The WTO is also considering a parallel case that the European Union has brought against the United States for providing subsidies to Boeing. The EU claims that the United States provided $20 billion in illegal subsidies to Boeing, including through Washington state tax breaks. A decision in that case is expected early next year and could authorize European retaliation against the United States.

The EU has already drawn up its own list of $20 billion of American imports it plans to tax after the Boeing ruling is announced, including aircraft, food and chemicals.

Speaking in Brussels on Monday, Cecilia Malmstrom, the outgoing European commissioner for trade, said the EU had tried to negotiate a way out of retaliatory tariffs, but the United States had not responded to these requests.

Malmstrom said she had approached U.S. officials “long before this summer” to discuss a resolution to the tariff spat.

“It’s not that they said ‘no,’ it’s that they have not engaged on this, and we have provided them paper and proposals and so on,” she said. “We would propose that we both freeze or suspend our tariffs while we talk, until we come to an agreement, and that remains to be seen.”

She added that both governments “need to discipline our air industries” and work to reform subsidies. “And it would be good to do that together,” she added.

“It is sometimes a little bit hard to predict the next step by the U.S. administration,” Malmstrom said.

The U.S. trade representative did not respond immediately for comment.

Malmstrom also said Monday that negotiations on a free-trade agreement with the United States had stalled. U.S. officials want agricultural goods to be included in any trade discussion, saying that a deal that excludes farm goods would be unlikely to be approved by Congress. The European Union has refused to put agriculture on the table and pushed for the pact to cover industries where the two governments already agree, namely nonauto industrial goods.

Source: New York Times