US threatens EU with new raft of tariffs in Airbus-Boeing dispute

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As President Donald Trump arrives in London for the NATO summit, in a move that is likely to increase transatlantic economic and political tensions, the US has threatened the EU with a new raft of tariffs in connection with the Airbus subsidies case at the World Trade Organization (WTO).

US trade representative Robert Lighthizer brought up the possibility of further, higher tariffs following Washington's latest legal victory in the ongoing dispute, with the WTO yesterday rejecting claims by Brussels that it no longer provided subsidies to Airbus.

The Geneva-based trade watchdog produced a compliance report which found that Airbus continued to be subsidised as a result of past loans from European governments.

In statement, Lighthizer said: “Strong action is needed to convince the EU that its interests lie in eliminating these market-distorting subsidies now and in the future so that our industries can compete on a level playing field.”

In October, Washington levied $7.5-billion (€6.79-billion) worth of tariffs on EU goods including cheese, wine and aircraft in connection with the Airbus case, but the trade representative said that it may go further still.

“In light of today’s report and the lack of progress in efforts to resolve this dispute, the United States is initiating a process to assess increasing the tariff rates and subjecting additional EU products to the tariffs,” it said. 

The new tariffs threat could set a tense backdrop for this week's NATO summit in London, which President Trump, along with other alliance leaders, is attending.

Among the other alliance leaders will be French President Emmanuel Macron whose country has been the subject of a proposed separate set of tariffs in connection with its digital services tax. Yesterday, the US suggested that up to 100% tariffs may be imposed on French products such as wine, cheese and champagne, after finding that the digital levy unfairly discriminated against US tech companies. The 3% digital tax, which was approved by the French Senate in July, is aimed at preventing multinationals such as Google, Amazon and Facebook from booking profits in low-tax countries such as Ireland, irrespective of where the revenue originated. 

Washington also continues to set tariffs on EU metals on national security grounds, which the EU recently made its case against to the WTO, and while it has not gone ahead with proposed plans to levy tariffs on EU cars and automobile parts, it has not ruled out doing so in the future.

Brussels has given a fiery response to the ruling by the WTO, saying that the body has made "serious legal errors" in the Airbus case. On Monday, the Geneva organisation said that the EU and four member states, France, Germany, Spain and the UK, had failed to comply with a ruling made in 2016 to end all illegal state support to Airbus over its A350 mid-range twin-aisle aircraft and the A380 superjumbo.

The WTO has now twice rejected the EU's claim of compliance. Nonetheless, the dispute, which has dragged on for 15 years now, looks unlikely to end anytime soon. In Spring 2020, it is expected that the WTO will rule on whether the EU should be allowed to put tariffs on US goods over the country's own illegal subsidies to Boeing.

“We consider that the panel has made a number of serious legal errors in its assessment of EU compliance,” said a European Commission spokesperson, adding: “The report also contains statements concerning workable ways to comply with the WTO rules on subsidies that would be very problematic for a larger part of the WTO membership to comply with.”

The spokesperson also said that the Commission, which has just begun a new term under President Ursula von der Leyen, was considering an appeal to "have these legal errors corrected".

The continued dispute, which was launched by the US in 2004 during the presidency of George W. Bush, has left Brussels and Washington at odds ever since in a tit-for-tat battle over how to support their respective aerospace champions. 

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