EU Pulls Trigger on Tariffs on Boeing Jets

 - November 9, 2020, 11:36 AM

The European Commission on Tuesday will begin imposing tariffs on U.S. exports into the EU worth $4 billion—including a 15-percent duty on Boeing aircraft—in retaliation for similar measures taken by the U.S. affecting Airbus and other European industries. The World Trade Organization (WTO) formally authorized the EU on October 26 to impose countermeasures in response to illegal U.S. subsidies to Boeing. The commission said Monday it stands ready to work with the U.S. to settle the dispute and to agree on long-term disciplines on aircraft subsidies.

“We have made clear all along that we want to settle this long-running issue. Regrettably, due to lack of progress with the U.S., we had no other choice but to impose these countermeasures,” said European commissioner for trade Valdis Dombrovskis. “The EU is consequently exercising its legal rights under the WTO's recent decision. We call on the U.S. to agree to both sides dropping existing countermeasures with immediate effect, so we can quickly put this behind us. Removing these tariffs is a win-win for both sides, especially with the pandemic wreaking havoc on our economies. We now have an opportunity to reboot our transatlantic cooperation and work together towards our shared goals.”

Based on separate WTO decisions on aircraft subsidies, the countermeasures bring the EU equal footing with the U.S., according to the EC. Along with the 15-percent duties on aircraft, the European measures include tariffs of 25 percent on a range of agricultural and industrial products imported from the U.S.

In a parallel case related to Airbus, the WTO allowed the U.S. in October 2019 to impose countermeasures against European exports worth up to $7.5 billion. The trade body based the amount on an appellate body decision in 2018 that had found that the EU and its member states had not fully complied with previous WTO rulings relating to repayable launch investment for the A350 and A380 programs.

Although officials from the U.S. and the EU have each voiced their desire to reach a negotiated settlement, former European Union trade commissioner Phil Hogan warned in July of an escalation of the trade war between the EU and the U.S. after he said Washington had rejected overtures to settle the dispute. The salvo followed an increase in March of U.S. duties on Airbus jets and European airplane parts from 10 to 15 percent.

That same month Airbus agreed with the governments of France and Spain to make amendments to the A350 launch investment contracts in an effort to finally settle the 16-year dispute.

Meanwhile, at the behest of Boeing, the state of Washington rescinded tax breaks introduced more than a decade and a half ago and renewed in 2013 to attract 777X wing production to the state.

For its part, Boeing insisted the tax break repeal by Washington state should have removed any basis for the WTO’s most recent ruling. “We are disappointed that Airbus and the EU continue to seek to impose tariffs on U.S. companies and their workers based on a tax provision that has been fully and verifiably repealed,” Boeing said in a statement last month. “Boeing supported repeal of the Washington state tax provision because complying with WTO rulings is the right thing to do, even though it was costly and came at a difficult time for our company and the industry. As the U.S. Trade Representative has said, ‘There is no valid basis for the EU to retaliate against any U.S. goods,’ given the repeal of that tax provision.”