The crossfire continues between the European Union and the United States on their public aid to their respective aircraft manufacturers. With the publication, on Wednesday 17 April, of the draft European tariff sanctions list on the pretext of correcting the impact of the respective subsidies, the Airbus/Boeing saga could enter its riskiest phase: that of fuelling a new tariff war.
After more than 15 years of disputes at the World Trade Organisation (WTO), the two proceedings, one brought by the EU against US aid to Boeing (DS 353) and the other brought by Washington against European subsidies to Airbus (DS 316) (see EUROPE 12224/20) are coming to an end.
After the WTO Dispute Settlement Body found subsidies on both sides and then shortcomings in the compliance of some of the identified subsidies, both sides now have a choice: in addition to bringing these subsidies into line with international trade rules, the EU and Washington can now opt for an amicable settlement, an option favoured by Airbus, or for tariff sanctions.
Washington will undoubtedly have opened fire by asking the WTO for permission to impose countermeasures first. Its Trade Representative, Robert Lighthizer, announced in early April the publication of a preliminary list of countermeasures against the EU worth nearly €10 billion per year (see EUROPE 12233/15).
The European Commission immediately embarked on a public consultation process until 31 May with its own list of US products worth a total of €17.4 billion. This consultation will identify with stakeholders the products that could be eliminated or added to the list, depending on their impact on European producers. These additional duties would be in place as long as the harmful effects of subsidies were felt.
In addition, according to European estimates from 2012, the real value of the damage suffered by Airbus is estimated at around €10.6 billion.
The EU has chosen easily interchangeable US exports, while targeting certain key sectors or states in the dispute, explained a senior Commission official. 50% of the products targeted come from the agri-food sector (fishery products, wines and spirits, chocolates). Also covered are: coal, leather products, tractors.
In the US list, the products that dominate are wines, spirits, cheeses, olive oil.
Nearly nine months of delay
These lists will be revised in line with the final publication by the WTO arbitrator of the value of the estimated damages and, therefore, of the corresponding rebalancing measures. These publications will take place 6 to 9 months apart: in the summer of 2019 for US measures, while the EU will probably not be able to implement its additional customs duties until 2020.
The EU will therefore most likely be exposed to US tariff sanctions, with no possibility of a response throughout this period.
For a negotiated compromise
The European Commission prefers an amicable settlement, pointing to the presence of competing, equally subsidised aircraft manufacturers in China.
“We do not want a tit-for-tat”, said Trade Commissioner Cecilia Malmström. And she added, “While we need to be ready with countermeasures in case there is no other way out, I still believe that dialogue is what should prevail between important partners such as the EU and the U.S […. ] provided these are without preconditions and aim at a fair outcome.”
To consult the list, see: https://bit.ly/2Gi7mds (Hermine Donceel)