The Washington Times Weekly

Restaurant­s seek end to tiff over plane parts

- BY TOM HOWELL JR.

Oregon restaurant owner Andrew Fortgang is eagerly awaiting the May reopening of his French restaurant­s after a year of pandemic closings. But the Chablis and Beaujolais will go down a bit easier if he can win another battle: eliminatin­g a 25% tariff on wine, cheese and other European products caught in a cross-Atlantic battle over airplane parts.

The Biden administra­tion and European Union agreed in March to suspend the tariffs for four months as they seek a “fresh start” in resolving a long-running fight over government subsidies to Airbus and Boeing. The dispute and judgments before the World Trade Organizati­on triggered tit-for-tat tariffs on agricultur­al products that have nothing to do with aerospace but have given food profession­als heartburn since late 2019.

The levies have forced companies up and down the supply chain to stomach smaller profit margins or to raise prices on consumers. Restaurant­s were hit hard by the pandemic and say they can ill afford a return of those markups.

“We’re done with surprises. We need that stability and need to be able to plan and move forward with confidence that these aren’t going to come back into play,” Mr. Fortgang, a co-owner and wine director at his Portland restaurant­s, told The Washington Times.

Bottles that once cost Mr. Fortgang about $20 are now $25, and it only gets worse for the high-end beverages such as scotch and Burgundy. With names Le Pigeon and Canard, his restaurant­s have an unmistakab­le French bent, so he can’t just pour products from Australia or Chile.

“It’s not like a fungible thing you can just trade one for another. That’s not why people come,” he said.

Even if he wanted to switch things up, the tariffs have destabiliz­ed the wine industry as a whole, making it difficult for distributo­rs to serve clients, whether they trade in European wine or American bottles from famous vineyards in Washington state, Oregon and California.

The World Trade Organizati­on approved the tariffs after 15 years of litigation over EU subsidies to Airbus. The U.S. said the subsidies were illegal and harmed American companies such as Boeing. The WTO agreed and granted the U.S. a $7.5 billion arbitratio­n award under President Trump, who frequently wielded tariffs as a negotiatin­g tool.

The levies targeted aerospace products and agricultur­al goods, including British cashmere, German roasted coffee and Spanish olive oil.

Meanwhile, Europe hit U.S. ketchup, orange juice and other goods with $4 billion in tariffs in November after the WTO ruled that Europe could retaliate for what

it said were illegal U.S. subsidies to Boeing, an Airbus rival.

Gabriella Beaumont-Smith, a macroecono­mics policy analyst at The Heritage Foundation, said the new administra­tion’s pause of tariffs in March was an act of good faith as it tries to put European relations on good footing.

Yet President Biden and U.S. Trade Representa­tive Katherine Tai will be under the gun to ax the tariffs completely.

“I don’t think that four months is long enough, and they should be lifted entirely on both sides,” Ms. Beaumont-Smith said of the tariffs. “They are harmful to American consumers, and European consumers as well.

“It is the worst time for the administra­tion if it were to reimpose these tariffs,” she said. “People have gone through a lot of hardship, and they don’t have to deal with more expense and more bureaucrac­y. I think the pandemic does create more pressure.”

The Biden administra­tion says it is committed to “a comprehens­ive and durable negotiated solution” to the aircraft dispute.

“Key elements of a negotiated solution will include discipline­s on future support in this sector, outstandin­g support measures, monitoring and enforcemen­t, and

addressing the trade distortive practices of and challenges posed by new entrants to the sector from non-market economies, such as China,” the U.S. Office of the Trade Representa­tive said in announcing the pause of tariffs.

Gary Hufbauer, a nonresiden­t senior fellow at the Peterson Institute for Internatio­nal Economics, said he would expect both sides to extend the deadline if they can’t strike a deal during the four-month pause.

“I would be surprised to see the tariffs reinstated. That would put a real cloud on Biden’s charm offensive with Europe,” he said. “The only thing that would trip up a resolution would be some new, unforeseea­ble challenge from Europe.”

As talks commence, he said, Europe may agree to limit its “launch aid,” in which countries loan huge sums to Airbus to produce new aircraft models and get repaid as models are sold. He said terms could call for commercial interest rates and full repayment of loans even if sales of models fall short in a given time frame.

U.S. restaurant owners and food purveyors, including the Specialty Food Associatio­n, say too many people would suffer if negotiator­s can’t reach a deal.

“There are no winners in trade wars, and these incrementa­l taxes created an additional burden on the food industry

that was already suffering due to COVID19,” Thomas Gellert, president of importer Atalanta Corp., said last month. “We are optimistic that now, as we see some hope for the food service market, restaurant­s can provide their guests the products they demand without this additional tax.”

Mr. Fortgang’s restaurant­s were shut down in March 2020 and reopened at limited capacity from June to November, before closing again. They plan to reopen during the first week of May.

When conditions are normal, “you can afford to pay an extra buck or two for the Iberico ham or bottle of Sancerre you’re serving. You can absorb that,” Mr. Fortgang said of the tariffs.

But it’s a different story when you’re operating at half capacity or recovering from a once-in-a-century health crisis.

“We’re still in an uncertain time as far as COVID, as far as the long-term effects on economic and the long-term effects on consumer behavior,” he said.

If the levies return, then people on the payrolls of businesses with tight margins will suffer the most.

“The super, super-wealthy people, they’re going to be fine. They’re going to buy [these products] and not care,” Mr. Fortgang said. “It’s really about the jobs it hurts here on this side of the pond.”

 ?? ASSOCIATED PRESS ?? Champagne and other emblematic products from European Union nations were slapped with 25% retaliator­y tariffs under the Trump administra­tion. U.S. food services that rely on such products had to absorb extra costs until the tariffs were paused in March.
ASSOCIATED PRESS Champagne and other emblematic products from European Union nations were slapped with 25% retaliator­y tariffs under the Trump administra­tion. U.S. food services that rely on such products had to absorb extra costs until the tariffs were paused in March.

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