Europe can impose tariffs on the U.S.
In long-running aircraft battle, WTO OKs $4 billion in levies
WASHINGTON >> The World Trade Organization on Tuesday gave the European Union permission to impose tariffs on $4 billion worth of American products annually in retaliation for illegal subsidies given to American plane-maker Boeing, a move that could result in levies on American airplanes, agricultural products and other goods.
The decision, which stems from a 16-year fight before the global trade body, follows a parallel case that the United States brought against Europe over subsidies to its largest plane-maker, Airbus. Last year, the Trump administration imposed tariffs on European planes, wine, cheese and other products after the WTO gave the United States permission to retaliate on up to $7.5 billion of European exports annually.
It remains to be seen whether the new tariffs will ultimately persuade the United States and Europe to come to a negotiated settlement that would lift the levies, or merely inflame relations and result in higher costs on businesses and consumers on both sides of the Atlantic. The European Union has repeatedly appealed to the United States to remove its tariffs, but U.S. officials say Europe has not taken the necessary actions to stop its Airbus subsidies.
The tariffs will not go into effect immediately. The European Union needs to request authorization from the WTO to impose the levies, which it can do at an Oct. 26 meeting at the earliest. The European Commission last year issued a preliminary list of American products that it could choose to tax, including aircraft, chemicals, citrus fruit, frozen fish and ketchup.
The tariffs, when American companies are reeling from the coronavirus pandemic, would be especially painful for Boeing, which is already struggling from a pair of devastating crises. Boeing, like Airbus, announced plans this summer to cut more than 10% of its global workforce amid a steep decline in travel, which has forced airlines to delay and scale back plans to buy planes. Both
Boeing and Airbus plan to cut more than 30,000 jobs in all.
Delta Air Lines, whose fleet includes hundreds of planes from both manufacturers, said Tuesday that it had scaled back plans to buy $5 billion worth of aircraft through 2022. Just under a million people were screened at federal airport checkpoints Monday, a decline of more than 60% from the same day last year.
Boeing is also still struggling with fallout from the 737 Max, a star of the company’s fleet of planes, which has been grounded worldwide since March 2019 after two crashes killed 346 people. In January, the company estimated that the grounding, which could be lifted in the coming months, would cost it more than $18 billion. The company is also contending with quality concerns related to another plane, the 787 Dreamliner, a wide-body jet designed for longdistance flights.
So far this year, Boeing customers have canceled 438 orders for the Max, with hundreds more orders removed from its books because of the low likelihood that they will be fulfilled, the company said Tuesday. After accounting for new sales and cancellations, Boeing has lost a net 381 orders for the year.
The WTO’s decision Tuesday rested on a Washington state tax break provided to Boeing and worth about $100 million a year. Lawmakers there repealed the tax break this year with Boeing’s support, but the WTO said the subsidy had nevertheless harmed Airbus from 2012 to 2015. Airbus contends that Boeing continues to receive other preferential tax treatment from the state.
“Airbus did not start this WTO dispute, and we do not wish to continue the harm to the customers and suppliers of the aviation industry and to all other sectors impacted,” Guillaume Faury, the company’s chief executive, said in a statement. “It is time to find a solution now so that tariffs can be removed on both sides of the Atlantic.”
Boeing said it was “disappointed” that Airbus and the EU had pursued the tariffs even after the tax break’s repeal, but said the company hoped that both would focus “on good-faith efforts to resolve this long-running dispute.” The EU had asked the WTO to authorize more than $8.5 billion in annual tariffs, while the U.S. said they should not exceed $412 million.
In a statement, Robert Lighthizer, the U. S. trade representative, said the European Union had no valid basis to impose tariffs since Washington had already repealed its tax break, and that the United States would seek more negotiations with Europe.