On October 13, 2020, a World Trade Organization (WTO) arbitrator ruled that the European Union (EU) may take countermeasures/implement retaliatory tariffs against the United States for illegal subsidies to Boeing. This ruling allows the EU to request authorization from the WTO’s Dispute Settlement Body (DSB) to take countermeasures against the United States at a level not to exceed $3,993,212,564 annually.
This ruling is part of the longstanding dispute between the United States and the EU over subsidies to their largest civil aircraft manufacturers, Airbus and Boeing. The arbitrator determined that payments to Boeing by the National Aeronautics and Space Administration (NASA) and the Department of Defense were not subsidies but that certain state of Washington tax exemptions and exclusions were subsidies in violation of the WTO’s Agreement on Subsidies and Countervailing Measures. The arbitrator concluded that Airbus suffered “adverse effects” of these subsidies from three sales won by Boeing between 2012 and 2015 that a previous WTO ruling determined would have been won by Airbus had a state of Washington tax break not been in place for Boeing.
This latest WTO ruling follows a 2019 decision allowing the United States to impose retaliatory tariffs of approximately $7.5 billion annually on various EU goods. See Updates of October 4, 2019 and August 13, 2020. Upon release of the ruling, U.S. Trade Representative Robert Lighthizer issued a statement that the EU has “no lawful basis to impose tariffs on imports from the United States.” He added, “Because Washington State repealed that tax break earlier this year, the EU has no valid basis to retaliate against any U.S. products. Any imposition of tariffs based on a measure that has been eliminated is plainly contrary to WTO principles and will force a U.S. response.”
The EU’s Executive Vice-President and Commissioner for Trade, Valdis Dombrovskis, in a statement, said:
This long-awaited decision allows the European Union to impose tariffs on American products entering Europe. I would much prefer not to do so – additional duties are not in the economic interest of either side, particularly as we strive to recover from the Covid-19 recession. I have been engaging with my American counterpart, Ambassador Lighthizer, and it is my hope that the U.S. will now drop the tariffs imposed on EU exports last year. This would generate positive momentum both economically and politically, and help us to find common ground in other key areas. The EU will continue to vigorously pursue this outcome. If it does not happen, we will be forced to exercise our rights and impose similar tariffs. While we are fully prepared for this possibility, we will do so reluctantly.
In his statement, Ambassador Lighthizer indicated that the United States also wished to negotiate a settlement to a WTO dispute that began in 2004, noting that he was “waiting for a response from the EU to a recent U.S. proposal and will intensify our ongoing negotiations with the EU to restore fair competition and a level playing field to this sector.”