3min read
PREVIOUS ARTICLE Reserve Bank Governor mulls ro... NEXT ARTICLE US stocks end sharply lower on...

Hours after getting the green light from the World Trade Organization, Washington moved Wednesday to retaliate against the EU, announcing it will slap tariffs on $7.5 billion (6.8 billion euros) worth of European goods starting October 18 over illegal subsidies for Airbus.

The ruling is the largest arbitration award in WTO history and a landmark moment in the longstanding Airbus-Boeing battle, which threatens to intensify already strained trade relations between the United States and the European Union.

In Washington, President Donald Trump hailed the decision, calling it a “big win” for the United States and claiming credit for the outcome of the 15-year-old case.

“We’re having a lot of wins at the WTO,” Trump said. “All of those countries were ripping off the United States for many years and they know I’m wise to it.”

The EU will face tariffs of 10 percent on aircraft and 25 percent on other goods, including agricultural and industrial products, a senior US trade official told reporters.

The final list of targeted goods is expected to be announced shortly.

Although the WTO ruling allows Washington to penalize the EU with duties of up to 100 percent, the United States has decided the retaliation will not go that far, the official said.

The goal is to resolve the dispute and US officials are ready and willing to negotiate, the official said.

The EU immediately threatened to respond to any US move.

“If the US decides to impose WTO authorized countermeasures, it will be pushing the EU into a situation where we will have no other option than do the same,” Brussels said in a statement.

However, a US trade official said that would be illegal under WTO rules and Washington would be prepared to respond.

The case began in 2004, when Washington accused Britain, France, Germany and Spain of providing illegal subsidies and grants to support the production of a range of Airbus products.

It has since been mired in the WTO’s complex dispute settlement system, which allows for a range of appeals.

But Wednesday’s decision, which cannot be appealed, marks the first time the United States has been cleared under international trade law to slap countermeasures on EU products. The sanctions could be in place by the end of the month.

With its Brexit deadline less than a month away, Britain said in a statement that “it should not be subject” to any sanctions Washington imposes on the EU and that it was seeking confirmation from the WTO that it was fully compliant with all rulings related to Airbus.

However, the US trade official told reporters the EU collectively bears responsibility for the failure to resolve the subsidy issue, indicating there would be no exemptions.

And the official indicated the countries that will be hit by tariffs could help convince Brussels to end the subsidies to the aircraft manufacturer.

Counter case

Brussels will also soon get the chance to impose its own WTO-approved tariffs.

In a separate case launched in 2005, the EU alleged that Boeing had received $19.1 billion worth of prohibited subsidies from 1989 to 2006 from various branches of the US government.

After earning a series of victories in that equally epic case, Brussels asked a WTO arbitrator to give it permission to slap retaliatory tariffs on $12 billion in US goods.

The WTO is likely to decide on a lower number in a decision expected in about six months.

The Europeans made a proposal in July to call a truce in which both sides would admit fault and figure out ways to curtail airline subsidies. The EU and United States have reached such settlements in the past.

EU Trade Commissioner Cecilia Malmstrom said this week that there had not yet been a positive US response to that proposal but that the bloc would continue to pursue a deal that avoided further tariffs and a deterioration in transatlantic trade.

“Our readiness to find a fair settlement remains unchanged,” the EU statement said, adding that the bloc had “shared concrete proposals with the US for a new regime on aircraft subsidies” but had not yet received a response.