U.S. Gets Final OK to Hit EU With $7.5 Billion Airbus Sanction

Bryce Baschuk

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The World Trade Organization on Monday formally authorized the U.S. to impose tariffs on about $7.5 billion worth of European exports annually in retaliation for illegal government aid to Airbus SE.

Members approved this month’s arbitration award -- the largest in the trade organization’s history -- at a special meeting of the dispute settlement body at the WTO’s headquarters in Geneva. The development marks the final procedural hurdle before the U.S. can retaliate against European goods, which it plans to do on Oct. 18.

The EU made a last-ditch appeal to the U.S. over the weekend to thwart the tariffs, seeking a negotiated settlement that would avoid the economic harm a tit-for-tat escalation would cause both parties. European Trade Commissioner Cecilia Malmstrom told her U.S. counterpart, Robert Lighthizer, that his tariff plan would compel the EU to apply countermeasures in a parallel lawsuit over aid the U.S. provided to Boeing Co.

“I strongly believe that imposing additional tariffs in the two aircraft cases is not a solution,” Malmstrom said in an Oct. 11 letter to Lighthizer seen by Bloomberg News. “It would only inflict damage on businesses and put at risk jobs on both sides of the Atlantic, harm global trade and the broader aviation industry at a sensitive time.”

‘Short-Sighted’

U.S. Ambassador to the WTO Dennis Shea said at Monday’s meeting in Geneva that the Trump administration’s preference is to “find a negotiated outcome with the EU that ends all WTO-inconsistent subsidies,” according to a copy of his remarks obtained by Bloomberg. Malmstrom said last month that the EU had reached out to the U.S. with a “detailed proposal,” but that the U.S. wasn’t willing to negotiate.

The EU said that it would be “short-sighted” for the U.S. to impose retaliatory tariffs on European goods and urged the U.S. to find a “fair and balanced solution” to the dispute, according to a statement delivered by Paolo Garzotti, the EU’s deputy head of delegation to the WTO.

“Both the EU and the US have been found at fault by the WTO dispute settlement system,” Garzotti said. “In the parallel Boeing case, the EU will in some months equally be granted right to impose additional countermeasures. The mutual imposition of countermeasures, however, would only harm global trade and the broader aviation industry.”

The EU has already published a preliminary list of U.S. goods -- from ketchup to video-game consoles -- it will target in a $12 billion plan for retaliatory levies related to the Boeing case. The WTO will issue an arbitration award next year.

The office of the U.S. Trade Representative previously said it would impose a 10% tariff on large civil aircraft from France, Germany, Spain and the U.K. The U.S. will also slap 25% levies on a range of other items including Irish and Scotch whiskeys, wine, olives and cheese, as well as certain pork products, butter and yogurt from various European nations.

(Updates with U.S. comment in the fifth paragraph.)

--With assistance from Jonathan Stearns.

To contact the reporter on this story: Bryce Baschuk in Geneva at bbaschuk2@bloomberg.net

To contact the editors responsible for this story: Brendan Murray at brmurray@bloomberg.net, Richard Bravo, Chris Reiter

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