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WTO OKs $4B In EU Tariffs In Boeing Subsidies Dispute

KEY POINTS

  • The U.S. won a parallel case that granted permission to impose $7.5 billion in tariffs on EU goods because of subsidies to Airbus
  • The WTO decisions are expected to serve as a basis for renewed trade talks
  • The EU had sought $8.5 billion in annual tariffs

The World Trade Organization on Tuesday gave the European Union the go-ahead to impose as much as $4 billion in tariffs on U.S. goods in the dispute over subsidies given to Boeing.

The retaliatory tariffs stem from a complaint filed 16 years ago and follows a parallel case the U.S. filed against the EU over tariffs to Airbus subsidies that resulted in permission to the U.S. to impose as much as $7.5 billion in tariffs on European planes, wine, cheese and other products.

Tuesday’s decision, however, does not go into effect immediately. The EU still needs to ask for the authority to impose the levies and submit a list of products to be affected.

The Boeing subsidies – a tax break granted by the state of Washington – have since been rescinded. The break was worth $100 million a year. Airbus, however, contends Boeing still is receiving preferential tax treatment.

EU trade commissioner Valdis Dombrovskis said the EU will work with the U.S. to decide on the next steps.

“Our strong preference is for a negotiated settlement,” Dombrovskis said.

Airbus CEO Guillaume Faury said the company would support the negotiating process.

“It is time to find a solution now so that tariffs can be removed on both sides of the Atlantic,” he said in a press release.

The EU had sought $8.5 billion in annual tariffs while the U.S. argued tariffs should be kept to less than $412 billion.

“The arbitrator determined that the level of countermeasures ‘commensurate with the degree and nature of the adverse effects determined to exist’ amounts to $3.99 million per annum,” the WTO ruled. “Therefore, the arbitrator concluded that the European Union may request authorization from the DSB [Dispute Settlement Body] to take countermeasures with respect to the United States … at a level not exceeding, in total, $3.99 million annually.”

Ole Moehr, an associate director at the Atlantic Council’s GeoEconomics Center, told the New York Times the dispute actually could serve as a basis for renewed trade talks after the U.S. presidential election Nov. 3.

“Both sides are waiting until the election is settled to re-engage, and depending on the outcome, we could see a ratcheting up of tensions before any potential deepening of trade ties,” Moehr told the Times.

The coronavirus pandemic has dealt a serious blow to Boeing and other U.S. companies. The airplane-maker cut more than 10% of its production as sales fell amid a near halt to air travel. Putting a point on the situation, Delta Tuesday announced in its third quarter earnings it would reduce aircraft purchases by more than $5 billion through 2022 as part of a restructuring.

Boeing also is still grappling with the fallout from the 737 MAX, which was grounded in March 2019 following two fatal crashes that killed 346 people. Aviation regulators have yet to reauthorize the aircraft for passenger use. The grounding is estimated to have cost Boeing upward of $18 billion. There also have been quality concerns related to the 787 Dreamliner.

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