America announces punitive tariffs on EU imports

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DThe US government will impose punitive tariffs on imports from the European Union in the billions due to illegal EU subsidies for the European aircraft manufacturer Airbus. As of 18 October, an additional charge of 10 percent will be levied on aircraft imports, with many other products being subject to a fine of 25 percent, a senior official of the US Trade Representative said Wednesday. The volume of punitive duties was initially unknown.

The World Trade Organization (WTO) arbitrators granted the US government the right the previous Wednesday to allow punitive tariffs of up to 100 percent on $ 7.5 billion worth of goods because of the subsidies. The basis for the retaliatory measures is the WTO ruling of May 2018, which ended the dispute over Airbus subsidies after nearly 15 years in favor of America.

The US government will soon publish the list of products affected by the new tariffs, the senior official said. They deliberately did not resort to the theoretically permitted maximum punitive tariffs of 100 percent because the government was relying on a negotiated settlement with the EU, the official said in a telephone briefing before the announcement of the new punitive tariffs. Of the now announced 25-percent tariffs, only whole aircraft, but not individual aircraft parts are affected, as said for the US Trade Representative Robert Lighthizer staff.

Washington had earlier indicated that the punitive tariffs would likely hit a number of cheeses, olive oil, oranges and flour in addition to the aviation industry. Import duties often target symbolically or politically important products, such as Italian Parmesan cheese or olive oil from Spain. This is to exert pressure to reach a negotiated solution.

The WTO Dispute Resolution Board (DSB) still has to approve the imposition of customs duties, but that is a matter of formality. The US government has asked for a meeting on October 14th. The duties may be imposed until the losing party – here the EU – has eliminated the alleged trade distortions. The EU says that has happened long ago. This has been checked by WTO trade experts since August 2018. The arbitrators rejected an EU motion to wait until the outcome was reached. There is no date yet.

EU Trade Commissioner Cecilia Malmström called the US imposition of punitive tariffs "short-sighted and counterproductive". Brussels hopes for negotiations with Washington, in which both sides should agree on what support aircraft manufacturers will be allowed in the future.

In addition, the EU now wants to impose billions in retaliatory tariffs on the United States, including aircraft components, tomato ketchup and game consoles. Malmström said, "If the US decides to implement WTO-approved countermeasures, they will put the EU in a situation where we have no choice but to do the same."

The EU refers to another WTO ruling that found illegal US subsidies to Airbus' competitor Boeing. In this case, however, the arbitration award is still pending on the amount of the sum. It is expected in early 2020. The EU claims $ 12 billion in damage per year. The Boeing ruling came in March 2019, ten months after the Airbus ruling.

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