A World Trade Organization (WTO) arbitrator has ruled that the United States may take countermeasures/implement retaliatory tariffs against the European Union (EU) concerning “adverse effects” arising from EU subsidies provided to Airbus. The arbitrator determined that the United States may request authorization from the WTO’s Dispute Settlement Body (DSB) to take countermeasures at a level not to exceed $7,49 billion annually. This ruling relates to a long-running dispute between the United States and the EU concerning allegations over subsidies to their largest civil aircraft manufacturers, Boeing and Airbus. The arbitrator determined that five sales campaigns involving the companies during the 2011-2013 period that resulted in winning bids by Airbus were affected by certain EU subsidies in violation of the WTO’s Agreement on Subsidies and Countervailing Measures. A previous WTO ruling determined that Boeing would have won the bids but for the EU subsidies.
The WTO arbitrator calculated the amount allowed for these retaliatory tariffs based on WTO findings that EU launch aid for Airbus has caused Boeing significant lost sales of large civil aircraft and impeded Boeing’s aircraft exports to the EU, Australia, China, Korea, Singapore and United Arab Emirates. In response to the ruling, U.S. Trade Representative (USTR) Robert Lighthizer stated, “For years, Europe has been providing massive subsidies to Airbus that have seriously injured the U.S. aerospace industry and our workers. Finally, after 15 years of litigation, the WTO has confirmed that the United States is entitled to impose countermeasures in response to the EU’s illegal subsidies.” After Lighthizer announced that the United States would begin applying tariffs on certain EU goods on October 18, 2019, the Office of the USTR released a final product list containing the affected items. [Update: see USTR’s notice published in the Federal Register on October 18,2019.] In total, the United States will impose a 10 percent tariff on the imports of new airplanes and other civil aircraft and a 25 percent duty on imports of agricultural and industrial products from various EU member countries. The bulk of the tariffs will affect imports from France, Germany, Spain and the United Kingdom.
According to the USTR, the arbitrator’s decision under the WTO rules is final and not subject to appeal. While this is correct, the ruling still must be approved before the WTO’s DSB. Accordingly, the USTR has requested that the DSB schedule a meeting for October 14, 2019. In addition, a separate WTO panel is considering whether EU subsidies for Airbus have been removed in compliance with WTO rules. If this separate ruling determines that the subsidies have been removed and the EU is in compliance with past WTO rulings on these aircraft subsidies, the United States would have to discontinue these retaliatory tariffs.