US Threatens EU with New Tariffs Over Airbus Subsidies
(Source: Deutsche Welle German Radio; issued April 09, 2019)
The Trump administration has lashed out at Brussels for subsidies received by aerospace giant Airbus. A US official has described growing impatience in Washington, saying: "The time has come for action."

The White House on Monday threatened to impose new tariffs on European products over subsidies to aerospace giant Airbus.

Relations between the US and the European Union have dived under President Donald Trump, in part because of his "America First" approach that emphasizes protectionist policies aimed at shoring up American industry.

What the US Trade Representative said:
--"Our ultimate goal is to reach an agreement with the EU to end all WTO-inconsistent subsidies to large civil aircraft."
--"This case has been in litigation for 14 years, and the time has come for action."
--When the EU ends these harmful subsidies, the additional US duties imposed in response can be lifted."

Trans-Atlantic tariffs

US Trade Representative's office said a number of civil aviation sector products could be hit with tariffs, including Airbus aircraft.

The Trump administration has previously threatened to impose tariffs on European products. Last year, it briefly imposed tariffs on European steel and aluminum.

The threat comes as Boeing, the US aerospace giant, suffers major share price losses after its 737 MAX was grounded following two deadly crashes.

Does Airbus benefit from subsidies?

For years, the US has tried to pressure the EU — especially member states France, Germany, Spain and the UK — into dropping subsidies for Airbus.

In 2011, a World Trade Organization (WTO) report found that the European aerospace company had benefited from more than €16 billion ($18 billion) in subsidies from 1968 to 2006.

The EU responded by removing certain subsidies, but Washington said it didn't go far enough. The US has continued to push proceedings at the WTO, which is expected to reach a result from the arbitration later this year.

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Airbus Says U.S. Sanctions On Its Aircraft Would Have No Legal Basis (excerpt)
(Source: Reuters; published April 09, 2019)
PARIS --- European planemaker Airbus said on Tuesday it saw no legal basis for the United States’ move towards imposing trade sanctions on its aircraft and warned of deepening trade tensions.

Washington on Monday proposed a list of EU products, from large commercial jets to dairy products and wine, on which to impose tariffs as retaliation for European aircraft subsidies.

The EU and the United States have fought for over a decade over mutual claims of illegal aid to plane giants Boeing and Airbus. Both sides have been judged by the WTO to have paid billions of dollars of subsidies to gain advantage, and asked to stop or face potential sanctions.

Airbus spokesman Rainer Ohler said the planemaker had taken measures to comply with the “relatively minor” outstanding requirements. U.S. talk of $11 billion worth of damage from EU subsidies to Airbus was excessive, he added.

“The amount is largely exaggerated and in any case will be defined by the WTO and not the U.S.” Ohler said. (end of excerpt)


Click here for the full story, on the Reuters website.

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USTR Proposes Products for Tariff Countermeasures in Response to Harm Caused by EU Aircraft Subsidies
(Source: United States Trade Representative; issued April 08, 2019)
WASHINGTON, DC –-- The World Trade Organization (WTO) has found repeatedly that European Union (EU) subsidies to Airbus have caused adverse effects to the United States. Today, the Office of the United States Trade Representative (USTR) begins its process under Section 301 of the Trade Act of 1974 to identify products of the EU to which additional duties may be applied until the EU removes those subsidies.

USTR is releasing for public comment a preliminary list of EU products to be covered by additional duties. USTR estimates the harm from the EU subsidies as $11 billion in trade each year. The amount is subject to an arbitration at the WTO, the result of which is expected to be issued this summer.

The European Union does not agree with the USTR’s interpretation of the WTO’s latest decision, and it preparing its own counter-actions.


“This case has been in litigation for 14 years, and the time has come for action. The Administration is preparing to respond immediately when the WTO issues its finding on the value of U.S. countermeasures,” said U.S. Trade Representative Robert Lighthizer. “Our ultimate goal is to reach an agreement with the EU to end all WTO-inconsistent subsidies to large civil aircraft. When the EU ends these harmful subsidies, the additional U.S. duties imposed in response can be lifted.”

In line with U.S. law, the preliminary list contains a number of products in the civil aviation sector, including Airbus aircraft. Once the WTO arbitrator issues its report on the value of countermeasures, USTR will announce a final product list covering a level of trade commensurate with the adverse effects determined to exist.

Background

After many years of seeking unsuccessfully to convince the EU and four of its member States (France, Germany, Spain, and the United Kingdom) to cease their subsidization of Airbus, the United States brought a WTO challenge to EU subsidies in 2004. In 2011, the WTO found that the EU provided Airbus $18 billion in subsidized financing from 1968 to 2006. In particular, the WTO found that European “launch aid” subsidies were instrumental in permitting Airbus to launch every model of its large civil aircraft, causing Boeing to lose sales of more than 300 aircraft and market share throughout the world.

In response, the EU removed two minor subsidies, but left most of them unchanged. The EU also granted Airbus more than $5 billion in new subsidized “launch aid” financing for the A350 XWB. The United States requested establishment of a compliance panel in March 2012 to address the EU’s failure to remove its old subsidies, as well as the new subsidies and their adverse effects.

That process came to a close with the issuance of an appellate report in May 2018 finding that EU subsidies to high-value, twin-aisle aircraft have caused serious prejudice to U.S. interests. The report found that billions of dollars in launch aid to the A350 XWB and A380 cause significant lost sales to Boeing 787 and 747 aircraft, as well as lost market share for Boeing very large aircraft in the EU, Australia, China, Korea, Singapore, and UAE markets.

Based on the appellate report, the United States requested authority to impose countermeasures worth $11.2 billion per year, commensurate with the adverse effects caused by EU subsidies. The EU challenged that estimate, and a WTO arbitrator is currently evaluating those claims.

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