US’ move seems to be directed at deflecting attention from the crisis faced by its civil aircraft behemoth Boeing following the worldwide backlash against the aircraft’s flight management system that caused the fatal accidents in Indonesia and Ethiopia. (AFP)
US’ move seems to be directed at deflecting attention from the crisis faced by its civil aircraft behemoth Boeing following the worldwide backlash against the aircraft’s flight management system that caused the fatal accidents in Indonesia and Ethiopia. (AFP)

US threatens to impose additional duties on European goods worth $11 bn

  • US claimed Monday the EU has failed to remove "those subsidies" found to be inconsistent by the WTO’s Appellate Body
  • US' action could be an attempt to pry open the EU's market for farm imports

Geneva: The United States has opened a new front in its trade war with the European Union by threatening to impose additional duties on $11 billion of European goods under the US Section 301 provisions. The US claimed Monday the EU has failed to remove "those subsidies" found to be inconsistent by the World Trade Organization’s Appellate Body with the core provisions of the WTO’s Agreement on Subsidies and Countervailing Measures in the festering tit-for-tat trade war between two civil aircraft behemoths Boeing and Airbus.

The US’ move seems to be directed at deflecting attention from the crisis faced by its civil aircraft behemoth Boeing following the worldwide backlash against the aircraft’s flight management system that caused the fatal accidents in Indonesia and Ethiopia.

In an unusual statement on 8 April, the office of the United States Trade Representative said "the World Trade Organization (WTO) has found repeatedly that European Union (EU) subsidies to Airbus have caused adverse effects to the United States." The USTR said it has launched "its process [on Monday] 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 also simultaneously released scores of EU goods that could be subjected to additional tariffs. The 14-page list includes among others non-military helicopters and other products, including fuselages and fuselage sections and horizontal and vertical stabilizers for use in new civil airplanes; swordfish streaks, yogurt of both flavoured and not-flavoured, butter, numerous varieties of cheese, and Roquefort cheese; olive oils of different varieties and fruits; and wines and carpets among others.

Even though the US announced its action under Section 301, it claimed in its statement that "this case [against Airbus] has been in litigation for 14 years, and the time has come for action." "The [Trump] Administration is preparing to respond immediately when the WTO issues its finding on the value of US countermeasures," the US Trade Representative Robert Lighthizer maintained..

Using selectively the WTO's AB rulings and agreements in the Airbus-Boeing trade war, the USTR has labored hard to justify its actions that are clearly not in consonance with the WTO provisions, said a Geneva-based analyst, who asked not to be quoted.

The Section 301, for example, has little to do with the festering Airbus-Boeing subsidy war. That the dispute has numerous aspects and a range of adverse-subsidies claims by both sides to their respective aircraft manufacturers is well known. If the US can find fault with the Airbus-subsidies, the EU too can find fault with the US subsidies to Boeing, the analyst said.

Recently, a compliance report by the WTO had established clearly the US had continued to provide subsidies to Boeing despite the WTO’s ruling. Last year, in its statement against the EU's compliance dispute claim (27 August 2018), the US had claimed that the adverse effects caused due to EU subsidies to the Boeing in the EU and third country markets amounted to between $ 7 and $ 10 billion. It is not clear how that figure had been increased to $11 billion.

Boeing welcomed the USTR's action against the EU on Monday. "Boeing supports the US Trade Representative and his team in their ongoing efforts to level the playing field in the global aircraft marketplace," the company said in a statement issued on 8 April, according to the Wall Street Journal. "Hopefully, the draft tariff list will compel the EU to comply with past WTO rulings against it," Boeing maintained.

More important, the US' action against the EU under Section 301 provisions has revealed that Washington is ready to impose unilateral crowbar tariffs on any country, including its trans-Atlantic ally, by selectively using the WTO rulings and agreements. The US, for example, used Section 301 provisions to impose unilateral tariffs on Chinese goods worth $ 250 billion. China had invoked dispute settlement proceedings against the US on grounds that the Section 301 provisions were inconsistent with the core WTO rules.

Perhaps, the US' action could be an attempt to pry open the EU's market for farm imports. A senior US White House trade official Clete Willems told the US Chamber of Congress that a trade deal that does not include agriculture [with the EU] will not be acceptable. The US is also concerned with the digital tax scheme being considered by France.

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