EU may impose punitive tariffs in the billions on America

After America’s punitive tariffs on European imports due to Airbus subsidies that distort competition, the EU is now on the move – and is allowed to impose punitive tariffs. Boeing does not understand this.

From the EU's point of view, it was wrongly subsidized: the American aircraft manufacturer Boeing

WAfter years of illegal subsidies for the American aircraft manufacturer Boeing, the European Union is now allowed to impose punitive tariffs on American imports amounting to almost four billion dollars (3.4 billion euros) per year. This was determined by independent mediators, which the World Trade Organization (WTO) reported on Tuesday in Geneva. The arbitrators remained far below the demands of the EU.

She had claimed twelve billion dollars in damage, and in conversation with the arbitrators, then 8.6 billion, because Airbus had been disadvantaged for years by state aid for competitor Boeing. In a similar case, arbitrators had already approved the United States for illegal subsidies for Airbus punitive tariffs on products from the EU amounting to 7.5 billion dollars.

The verdict was the provisional line under the two disputes between the trading giants America and the EU, which have lasted for more than 15 years. An appeal is excluded. The EU has already threatened taxes on ketchup, game consoles and other products.

“To a certain extent irrelevant”

For the time being, however, the EU wants to forego the possibility of levying punitive tariffs. “We clearly prefer a negotiated solution,” commented the Vice President of the EU Commission responsible for trade policy, Valdis Dombrovskis, on Tuesday. The EU will immediately contact the United States in a positive and constructive manner in order to decide on the next steps.

Accordingly, the EU only wants to impose the possible punitive tariffs if no agreement can be reached. If there is no negotiated solution, the EU will be forced to defend its interests and respond appropriately, said Dombrovskis.

The aircraft manufacturer Boeing had previously criticized the decision of the WTO and described it as “somewhat irrelevant”. Boeing was disappointed that Airbus and the EU continued to pursue punitive tariffs, even though the aid contested by the WTO had already been “completely and verifiably” lifted by the American side, the group announced on Tuesday.

Since the illegal practices according to the WTO have already been eliminated by the United States, the decision is baseless, at least according to Boeing’s argument. Instead of escalating the conflict further, Airbus and the EU should use their energies to find an amicable solution to the conflict.

The punitive tariffs are between 15 and 25 percent

In March 2019, the WTO arbitrators concluded that the United States had not stopped government aid to Boeing that had been contested for years before. Since then, arbitrators have been busy determining the amount of the permitted punitive tariffs. The subsidies included research funds from the NASA space agency and tax breaks. The former bestseller of the Americans, the long-haul aircraft Boeing 787, called the Dreamliner, was also subsidized by the state.

A good 15 years ago, the EU and America sued each other at the WTO for aid to Airbus and Boeing. The United States’ complaint about Airbus closed a little faster. As early as May 2018, arbitrators discovered in the Airbus case that Brussels had not stopped the subsidies that had been complained of. In October 2019, they approved punitive tariffs on goods valued at $ 7.5 billion a year in the United States. That was the highest amount approved since the WTO was founded in 1995.

The United States implemented the judgment immediately: They made the import of cheese, butter, wine and many other products from Europe more expensive, as well as components for the aviation industry. The punitive tariffs are between 15 and 25 percent. They primarily punished the countries that paid Airbus subsidies: Germany, France, Spain and the UK.

The illegal practices have already been eliminated

The victorious party in a trade dispute may levy punitive tariffs until the losing party has eliminated the subsidies in question. The EU has been asserting for months that all Airbus aid has been suspended and the punitive tariffs must be stopped. She has called for a new assessment by the arbitrators, but her motion is not making any progress in the crisis-ridden WTO. The United States also says the Boeing aid complained of no longer exists.

The EU last offered America in July to negotiate a settlement of the disputes and an end to all punitive tariffs. Washington initially did not respond.

However, the Family Businesses Foundation has warned of an escalation in the trade conflict between America and the EU. The EU Commission must now use the opportunities for a negotiated solution, the association demanded. “The fact that the EU can now impose retaliatory tariffs for illegal Boeing subsidies represents an opportunity for an appropriate reaction and thus a settlement of the trade conflict,” said Stefan Heidbreder, Managing Director of the Family Businesses Foundation in Berlin on Tuesday. “Nobody is served by a further escalation of the trade dispute.”

The European Union and the United States must find ways to end the trade dispute as soon as possible. “Those who suffer from US punitive tariffs on many product groups are often family businesses – and they have nothing to do with the cause of the conflict.” According to a study by the foundation, existing additional tariffs in the USA for family businesses led to significant sales losses in American business. According to the investigation, the American tariffs primarily covered agricultural products, food, spirits, tools and metal products in addition to European aircraft.