The World Trade Organization on Tuesday authorized the European Union to impose nearly $4 billion worth of tariffs annually on U.S. goods in response to what the trade body declared prohibited subsidies to Boeing. The decision comes about a year after the WTO authorized the U.S. to impose tariffs on $7.5 billion worth of Airbus jets and other goods from the UK, France, Germany, and Spain. Meanwhile, the EU has already finished its public consultation on planned countermeasures and has published the preliminary list of U.S. products to which they will apply, including Boeing aircraft.
Both sides filed complaints at the WTO on Oct. 6, 2004, though the parallel cases have followed different timetables. The EU filed a second complaint over subsidies to Boeing in 2014. The ruling against the EU stemmed from government support of the development of the A380 and A350, while the ruling on Boeing centered on tax breaks from the state of Washington introduced more than a decade and a half ago and renewed in 2013 to attract 777X wing production to the state. The state of Washington rescinded the tax breaks at the behest of Boeing just this year, but too late to materially affect the WTO’s decision.
Although officials from the U.S. and the EU have each voiced their desire to reach a negotiated settlement, European Union trade commissioner Phil Hogan warned in July of an escalation of the trade war between the EU and the U.S. after he said Washington had rejected overtures to settle the dispute. The salvo followed an increase in March of U.S. duties on Airbus jets and European airplane parts from 10 to 15 percent.
That same month Airbus agreed with the governments of France and Spain to make amendments to the A350 Repayable Launch Investment (RLI) contracts in an effort to finally settle the 16-year dispute.
“Airbus did not start this WTO dispute, and we do not wish to continue the harm to the customers and suppliers of the aviation industry and to all other sectors impacted,” said Airbus CEO Guillaume Faury in a written statement on Tuesday. “As we have already demonstrated, we remain prepared and ready to support a negotiation process that leads to a fair settlement. The WTO has now spoken, the EU can implement its countermeasures. It is time to find a solution now so that tariffs can be removed on both sides of the Atlantic.”
For its part, Boeing insisted the tax break repeal by Washington state should have removed any basis for Tuesday’s ruling.
“We are disappointed that Airbus and the EU continue to seek to impose tariffs on U.S. companies and their workers based on a tax provision that has been fully and verifiably repealed,” Boeing said in its own statement. “Boeing supported repeal of the Washington state tax provision because complying with WTO rulings is the right thing to do, even though it was costly and came at a difficult time for our company and the industry. As the U.S. Trade Representative has said, ‘There is no valid basis for the EU to retaliate against any U.S. goods,’ given the repeal of that tax provision.
"Nothing in today’s WTO report changes that. Because the WTO authorizes tariffs only to induce compliance, and because repeal of the tax provision achieved that compliance, today’s report is effectively irrelevant, and EU tariffs would not be permissible under WTO law. Rather than escalating this matter with threats to U.S. businesses and their European customers, Airbus and the EU should be focusing their energies on good-faith efforts to resolve this long-running dispute.”