EU Eyes New Tariff Hit On US
By Washington Insider-Progressive Farmer
The transatlantic trade conflict isn't showing signs of winding down any time soon – and a new ruling from the World Trade Organization could mean that a fresh round of retaliatory tariffs could jeopardize economic recoveries in both the U.S. and the European Union.
Bloomberg is reporting this week that the WTO gave the EU authority to impose tariffs on $4 billion of U.S. exports over illegal government aid provided to Boeing Co. The EU previously said it would act on the levies immediately to counteract $7.5 billion of tariffs Washington placed on European goods in a separate case involving Toulouse, France-based Airbus SE.
The judgment comes at a delicate moment, with the U.S. presidential election just over a month away and as the U.S. and the EU struggle to recover from coronavirus-induced recessions. The EU tariffs will target coal producers, farmers and fisheries, in addition to aircraft makers, all politically important industries for the President and his Republican allies in Congress.
If the two sides can't resolve the tit-for-tat aircraft dispute, “we will have another tariff fight on our hands, with consumers and producers on both sides caught in the middle and paying the price,” said Simon Lester, an associate director at the Cato Institute.
A key question now is whether the EU will move quickly to trigger its tariffs against the U.S. or await the outcome of the Nov. 3 election. If the EU immediately triggers the new tariffs it could provoke the Trump administration, which claims it has already brought its Boeing subsidies into compliance.
If the EU waits until after the election, there's the possibility that Brussels could find a more amenable negotiating partner in Joe Biden, the Democratic nominee, whose advisers have pledged to seek a swift end to Trump's “artificial trade war” with Europe.
The WTO ruling, about a third of what the EU requested, is the latest twist in the 16-year Boeing-Airbus conflict. And it represents just one of several sources of friction in the trade relationship between the EU and the U.S.
The most recent troubles started in 2018 when the administration invoked national-security considerations to impose tariffs on steel and aluminum from Europe. As a U.S. military ally, the EU was infuriated and promptly retaliated with levies on U.S. goods including iconic brands such as Harley-Davidson Inc. motorcycles and Levi Strauss & Co. jeans.
While both the EU and U.S. say they want to reach a settlement to the aircraft dispute, the Trump administration has rejected all of Brussels' previous overtures.
The sheer number of pending disagreements between the EU and the U.S. means that a dispute could escalate quickly into a broader trade war, Bloomberg says. Earlier this month, the president renewed a threat to hit European cars with levies, a move that would draw immediate retaliation from the bloc.
The Boeing case comes less than a year after the WTO hit the U.S. with a record $7.5 billion retaliation award in response to the EU's illegal subsidies to Airbus SE. The U.S. has since levied 15% duties on Airbus aircraft and 25% tariffs on a range of European consumer exports, such as Scotch and French wine.
A large ruling in the Boeing case would allow the EU to retaliate over the Airbus tariffs and would also give the bloc more leverage in negotiating a settlement to the dispute. It would also allow the EU to capitalize on the delicate political situation in the U.S. as this fall's election campaigns go into full swing.
“The ongoing implementation of tariffs and trade disputes appear to be contributing factors in the slowing of global economic growth, particularly in Europe and China,” St. Louis-based Arch Resources Inc.'s management wrote in its annual report in February.
The proposed tariffs could also target about $700 million worth of U.S. seafood exports to the EU, which would impact Louisiana fishermen represented by Republican House Minority Whip Steve Scalise, R., La.
While it's still possible that the EU and U.S. could reach a negotiated settlement that avoids a tit-for-tat tariff escalation, that prospect looks increasingly remote.
U.S. Trade Representative Robert Lighthizer said he's seeking two things: A pledge from Europe to end its subsidies to Airbus and monetary compensation. “It is going to require commitments not to do it again but also paying back some element of the subsidy,” Lighthizer said in a Chatham House event in July.
In July the governments of France and Spain revised the terms of their launch aid loans to Airbus to make them compatible with WTO rules. The Trump administration has already rejected the move as insufficient and alleged the EU's subsidy regime remains illegal.
If the U.S. and the EU are unable to reach a settlement, the bloc's newly designated trade chief has pledged to resort to targeted levies. “We will if we will have to, but our preference would be to have an agreement with the U.S. in between where they also withdraw their tariffs,” EU trade chief Valdis Dombrovskis told Bloomberg earlier this month.
So, we will see. While this dispute certainly is likely to attract U.S. attention there seems to be no real willingness to move toward settlement. Because these trade policy wars often seem to have the potential to spread quickly and widely, the policies proposed and implemented should be watched closely as they emerge, Washington Insider believes.