Trade body says EU can sanction US$4b worth of US goods

International arbitrators say the European Union can impose tariffs and other penalties on up to US$4 billion worth of United States goods and services over illegal American support for plane-maker Boeing.

The move further sours transatlantic ties at a time when the coronavirus has doused trade and savaged economies.

The ruling by the World Trade Organization arbitrators, which could inflame Trump administration criticism of the Geneva-based body, amounts to one of the largest penalties handed down by the WTO.

It comes a year after another ruling authorised the United States, US, to slap penalties on EU goods worth up to US$7.5 billion – including Gouda cheese, single-malt whiskey and French wine – over the bloc’s support for Boeing rival Airbus.

The latest decision is final, cannot be appealed, and puts the final word on a stand-off dating back to 2006. It is just one part of a string of long-running disputes between the two plane-making giants at the WTO. And it sets the stage for what could become intense negotiation between the EU and United States to end what could become tit-for-tat transatlantic sanctions.

The arbitrators were tasked with setting a dollar value in sanctions such as tariffs that the EU could impose after the WTO’s appellate body found last year that Boeing had received at least US$5 billion in subsidies that were prohibited under international trade rules.

The United States had argued that the illegal support merited no more than US$412 million in penalties, while the European bloc had countered that they deserved nearly US$8.6 billion. The award, in essence, was nearly 10 times more than what the US had claimed, and under half that the EU wanted.

The EU had argued that tax breaks for Boeing from Washington state, which was once headquartered in Seattle and has major manufacturing operations in the state, unfairly harmed Airbus jets in the large single-aisle civil aircraft market — namely, the A320neo and A320ceo aircraft. The US argues that those tax breaks ended this year, eliminating any basis for the award.

“Because Washington state repealed that tax break earlier this year, the EU has no valid basis to retaliate against any US products,” said US Trade Representative Robert Lighthizer in a statement. “Any imposition of tariffs based on a measure that has been eliminated is plainly contrary to WTO principles and will force a US response.”

Alluding to the earlier WTO decision against EU support for Airbus, Lighthizer added: “We are waiting for a response from the EU to a recent US proposal and will intensify our ongoing negotiations with the EU to restore fair competition and a level playing field to this sector.”

The WTO arbitrators said that the lifting of the tax breaks was not enough to prevent the award in favour of the EU.

European Commission Executive Vice-President Valdis Dombrovskis said Tuesday’s ruling move will allow the EU to slap tariffs on American goods entering Europe, but “I would much prefer not to do so – additional duties are not in the economic interest of either side, particularly as we strive to recover from the COVID-19 recession”.

“It is my hope that the US will now drop the tariffs imposed on EU exports last year,” he added. “This would generate positive momentum, both economically and politically, and help us to find common ground in other key areas.”

Bernd Lange, chairman of the European Parliament’s trade committee, said the EU should enact the tariffs now, though he urged both sides to enter talks. He cautioned that “the EU should not be naive” in case of a lack of “constructive engagement from the American side even after the presidential elections”.

Boeing, in a statement, wrote: “We are disappointed that Airbus and the EU continue to seek to impose tariffs on US companies and their workers based on a tax provision that has been fully and verifiably repealed.” It also argued that WTO rules are only used to force compliance – and the plane-maker insisted the US is now in compliance – so any EU tariffs “would not be permissible”.

“Rather than escalating this matter with threats to US businesses and their European customers, Airbus and the EU should be focusing their energies on good-faith efforts to resolve this long-running dispute,“ Boeing said.

– AP