By Ana Swanson | April 9, 2019
The United States and the European Union are preparing to impose tit-for-tat tariffs on each other’s products, the latest escalation in a 14-year fight over government aid given to Boeing and European rival Airbus.
“The World Trade Organization finds that the European Union subsidies to Airbus has adversely impacted the United States, which will now put Tariffs on $11 Billion of E.U. products!” President Trump said in a tweet on Tuesday morning. “The E.U. has taken advantage of the U.S. on trade for many years. It will soon stop!”
The office of the United States trade representative said on Monday night that it was preparing a list of European products to tax as retaliation for European subsidies to Airbus, which the World Trade Organization ruled were illegal in May 2018. That prompted the European Union to announce that it was also readying a list of tariffs to counter American subsidies to Boeing.
The moves come amid tense trade relations between the United States and Europe, which are engaged in a battle of tariffs after Mr. Trump’s decision last year to tax European steel and aluminum. Mr. Trump has repeatedly threatened to impose tariffs on European cars and car parts if the European Union does not agree to better trade terms for American products, and Europe has said it will retaliate on American goods if Mr. Trump follows through on that threat.
The announcement of new tariffs stems from a dispute that began in 2004 related to government subsidies that Europe provides to Airbus.
Last May, the W.T.O. found that Airbus had received illegal funding for several of its aircraft models. The United States requested the authority to impose retaliatory tariffs of $11.2 billion per year, and the two sides are awaiting a decision on the level of tariffs that the United States will be authorized to levy on the European Union.
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In preparation for that decision, which is expected this summer, the United States announced Monday night that it was beginning to identify European products to tax, so it could impose the duties as soon as the organization ruled. The initial list would cover $11 billion of trade in products including airplanes, cheese, fish, wine, clothing, nails, pipes and clocks — the same dollar amount of harm that the United States trade representative estimated European subsidies cause each year.
“This case has been in litigation for 14 years, and the time has come for action,” Robert Lighthizer, the United States trade representative, said in a statement.
“Our ultimate goal is to reach an agreement with the E.U. to end all W.T.O.-inconsistent subsidies to large civil aircraft,” Mr. Lighthizer said. “When the E.U. ends these harmful subsidies, the additional U.S. duties imposed in response can be lifted.”
The European Commission indicated on Tuesday that it considers the $11 billion in retaliatory measures to be overblown and not justified by any findings by the World Trade Organization.
“The figure quoted by the U.S. trade representative is based on U.S. internal estimates that have not been awarded by the W.T.O.,” Daniel Rosario, a European Commission spokesman, said during a press briefing in Brussels Tuesday, reading from a prepared statement.
In a statement, Airbus called the American tariff announcement “totally unjustified” and said that the European Union would take “far larger countermeasures against the U.S.”
Mr. Rosario said the commission, the European Union’s administrative arm, would ask W.T.O. arbitrators to authorize retaliatory measures, which would be in response to a W.T.O. finding last month that Boeing received tax breaks in Washington State and incentives in South Carolina that amounted to subsidies.
The European Commission has begun drawing up a list of products that would be covered by retaliatory tariffs, but is awaiting a W.T.O. decision before specifying which products would be targeted and how much trade they would encompass.
In a statement, Boeing said that it supported the United States trade representative and hoped that the draft tariff list would encourage the European Union “to comply with past W.T.O. rulings against it” and “end all illegal government support for Airbus.”
The escalation comes at a difficult moment for Boeing, which is in the midst of a crisis after two of its 737 Max jet planes were involved in fatal crashes in five months. The company announced last week that it would begin slowing production of the jet, which represents billions of dollars of outstanding orders in the coming years. Stock markets in the United States were slightly lower on Tuesday, with the Standard & Poor’s 500-stock index down 0.6 percent. Shares of Boeing were down 1.5 percent.
The United States’ arguments at the W.T.O. have centered on billions of dollars of “launch aid” that the European Union has given Airbus to develop new products. The United States has long argued that such aid gave Airbus an unfair advantage, allowing it to gain market share in Europe, Australia, China, South Korea and elsewhere at Boeing’s expense.
European criticism of the American aviation sector has mostly focused on government research contracts granted to Boeing through agencies like the Defense Department and NASA, as well as tax breaks at the federal, state and local levels.
While the subsidy dispute predates Mr. Trump’s trade war by many years, the conflict has recently taken on some of the same tone that has characterized relations between the United States and Europe during the last two years, including reciprocal threats, radically different interpretations of the same facts, and an undercurrent of hostility among the NATO allies.
The two governments announced plans in July to negotiate an agreement that would reduce tariffs and other barriers to trade on both sides of the Atlantic, but have since disputed exactly what would be included in the agreement.
Chad Bown, a senior fellow at the Peterson Institute, said the list being drawn up by the United States was notable because it targeted European aircraft sales, which have not typically been included on past retaliation lists. “If Trump goes first, expect the E.U. to respond by hitting Boeing’s sales in Europe,” Mr. Bown said.
He added that tariffs on Airbus would also affect American companies, since it purchases many components for its aircraft from the United States.
Trade experts suggested the organization was likely to decide in the United States’ favor on the tariffs, which they described as significant but not surprising.
Jennifer Hillman, a professor at Georgetown Law, said the Trump administration’s tariffs appeared to be compliant with W.T.O. rules, as long as the United States waited for the organization’s final decision before imposing its tariffs. “If U.S.T.R. wants to impose the tariffs as soon as the arbitration amount is announced, they need to start the public process now so as to be ready with a specific list of products as soon as arbitrator says the amount.”
Matthew Gold, an adjunct professor of law at Fordham University, said, “The W.T.O. dispute settlement body will likely authorize the United States to impose retaliatory tariffs in the magnitude we’re asking for, or close to it.”
Mr. Trump and his advisers have fiercely criticized the World Trade Organization for infringing on trade decisions that they insist should be the purview of the United States, and for failing to police unfair behavior by China.
However, they also have been quick to publicize the organization’s decisions when it finds in their favor.
In its statement Monday, the Trump administration emphasized that its latest measures against the European Union would comply with the rules of the World Trade Organization. And Mr. Trump also cited the organization in his tweet supporting the tariffs. In a separate announcement Tuesday, the United States trade representative said the W.T.O. made a decision in its favor in a separate long-running dispute with Canada over trade in lumber.
Jack Ewing contributed reporting from Brussels.
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