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U.S. threatens to impose tariffs on EU products over aircraft subsidy dispute

Christian Fernsby |
U.S. President Donald Trump said Tuesday the United States will impose tariffs on 11 billion U.S. dollars' worth of products from the European Union (EU), ratcheting up a protracted bilateral dispute over aircraft subsidies.

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"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 EU products!" Trump said on Twitter. "The EU has taken advantage of the U.S. on trade for many years. It will soon stop!"

Trump's tweet came one day after the Office of the United States Trade Representative (USTR) issued a statement saying it has begun a process under Section 301 of the Trade Act of 1974 "to identify products of the EU to which additional duties may be applied until the EU removes those subsidies."

The USTR said it is releasing for public comment a preliminary list of EU products to be covered by additional duties. "In line with U.S. law, the preliminary list contains a number of products in the civil aviation sector, including Airbus aircraft," it added in the statement.

According to the list, the products that will potentially be subject to the additional tariffs also include commodities such as a variety of seafood, dairy products, processed fruits, wine, garments, among others.

The case of EU subsidies to Airbus, according to remarks by U.S. Trade Representative Robert Lighthizer carried by the USTR statement, "has been in litigation for 14 years, and the time has come for action."

Lighthizer said the Trump administration "is preparing to respond immediately when the WTO issues its finding on the value of U.S. countermeasures." The result of the WTO arbitration is expected to come out in this summer.

An EU official was quoted by the Financial Times as saying that the 11-billion-dollar figure "is based on US internal estimates that have not been awarded by the WTO" and is "greatly exaggerated."

"The EU will request the WTO-appointed arbitrator to determine the EU's retaliation rights," the official said. "The commission is starting preparations so that the EU can promptly take action based on the arbitrator's decision."

Washington and Brussels have locked themselves in a grueling dispute settlement process at the WTO since 2004, featuring tit-for-tat appeals and counter-appeals against each other.

As the United States accuses the EU of subsidizing Airbus and the EU challenges the United States for illegally aiding Boeing Co, both sides claimed partial victory along the way.

In March 2012, the WTO ruled that at least 5 billion dollars' worth of U.S. subsidies to Boeing were illegal, notifying the United States to scrap them.

In June 2017, the WTO agreed with the EU in a ruling saying that the United States had not fully complied with the 2012 request asking it to remove the subsidies, citing the case of Washington state's tax breaks.

The USTR said a WTO appellate report in May 2018 found that "EU subsidies to high-value, twin-aisle aircraft have caused serious prejudice to U.S. interests," and that the EU's launching aid to Airbus' A350 XWB and A380 caused "significant" lost sales and lost market to Boeing.

On May 15, 2018, The European Commission issued a press release, which quoted European Trade Commissioner Cecilia Malmstrom as saying that the appellate report "has definitively rejected the U.S. challenge on the bulk of EU support to Airbus," adding that the EU "will now take swift action to ensure it is fully in line with the WTO's final decision in this case."

The EU's "remaining compliance obligations," according to Malmstrom, involve repayable loans provided to the newer A380 and A350 XWB models.

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