Europe Sees an Olive Branch in Latest U.S. Tariff Move on Airbus
The U.S. stepped up pressure on Germany and France with extra tariffs on some of their goods.
(Bloomberg) --
The U.S. left largely intact its list of European products worth $7.5 billion targeted with tariffs because of illegal Airbus SE subsidies, opting not to follow through on a threat to substantially increase the economic pain on its transatlantic trade partners.
In a statement in Washington on Wednesday, the U.S. Trade Representative’s office said it was making “modest” changes to the list of products subject to tariffs, while leaving the overall amount of goods unchanged. The U.S. didn’t carry out a threat to increase the tariff rate to 100% from the current 15% and 25% levels, nor did it expand the list of products to include $3.1 billion of new goods.
The European Union, which handles trade matters for the 27-nation bloc, said the restraint could pave the way for a broader agreement to put the long-running aircraft conflict behind them.
The EU “acknowledges the U.S. decision not to exacerbate the ongoing aircraft dispute by increasing tariffs on European products,” according to a European Commission post on Twitter. “Both sides should now build on this decision and intensify their efforts to find a negotiated solution to the ongoing trade irritants.”
USTR Robert Lighthizer said in the statement the U.S. is “committed to obtaining a long-term resolution to this dispute.”
Lighthizer added that he would start a new process with the EU to reach an agreement. The EU’s top trade negotiator, Phil Hogan, wrote on Twitter on Thursday that the bloc would “intensify our efforts with the U.S. to find a negotiated solution.”
The announcement said it would remove from the tariff list certain products from Greece and the U.K., and add an equivalent amount of trade from France and Germany. Sweet biscuits were exempted in the latest review, and Britain’s gin industry was spared higher tariffs. But duties on another big U.K. spirits industry remained.
“I welcome the decision not to impose tariffs on gin and blended whisky, and to remove tariffs on shortbread. But there are still tariffs on goods like single-malt Scotch. These tariffs are in no one’s interests. I am in further talks with USTR to remove them asap,” U.K. International Trade Secretary Liz Truss said in a Twitter post on Thursday.
‘Retaliate Firmly’
French wine exporters have been among the hardest-hit industries. Finance Minister Bruno Le Maire, speaking at an event near the Spanish border, said he supports work on a settlement but “if there isn’t a rapid resolution, the EU must prepare to retaliate, to retaliate firmly and in a united way.”
Airbus said it “profoundly regrets” the U.S.’s decision to maintain the tariffs despite Europe’s recent actions to achieve full compliance “at a time when aviation and other sectors are going through an unprecedented crisis.
“Airbus trusts that Europe will respond appropriately to defend its interests and the interests of all the European companies and sectors, including Airbus, targeted by these tariffs,” it said in a statement.
Shares of the Toulouse, France-based company fell as much as 3.6%.
The announcement prolongs the burden of import taxes on American businesses and consumers just as the global economy tries to claw back from a steep downturn tied to the Covid-19 pandemic. U.S. retailers, restaurants and importers that are struggling to stay afloat after nearly six months of restrictions and lockdowns had pleaded with USTR for tariff relief.
“There is clear evidence that the U.S. beverage alcohol industry has been negatively impacted as a direct result of these tariffs, which is now being compounded by the impact of restrictions related to preventing the spread of Covid-19,” a group of U.S. trade associations wrote in a letter to USTR, one of nearly 24,000 public comments submitted in the case.
The Trump administration won a long-awaited judgment from the World Trade Organization last October stemming from a dispute between Airbus and Boeing Co. that dragged on for more than 15 years. The ruling authorized tariffs on a record $7.5 billion in European imports.
The EU, meanwhile, is waiting for a WTO decision to come as early as September that may allow for retaliation against the U.S. Brussels has asked for its own multibillion-dollar award in a separate case that found Chicago-based Boeing Co. received illegal subsidies.
Negotiations
Hogan last month stepped up a call for the U.S. to negotiate a settlement to the transatlantic dispute. Failing to resolve the issue will force the 27-nation bloc to impose tit-for-tat tariffs on American goods and ultimately leave both sides weaker.
“We should sit down and talk in the next couple of months,” Hogan said during an online event organized by the Carnegie Endowment for International Peace. “Otherwise, we’re going to be putting tariffs on each other for the rest of this year.”
Lighthizer last month told Chatham House that a settlement with the EU must “require commitments to not do it again but also paying back some element of the subsidy.”
Just how much payback and in precisely what form remains unclear. So far, Washington has rejected at least three offers from Brussels for a settlement because the EU and U.S. “don’t have the same number,” he said.
The U.K. has been caught in the crossfire. British companies are subject to U.S. tariffs because they were part of the EU during the Airbus subsidy years, but Prime Minister Boris Johnson’s government is largely frozen out of any effort by Brussels to negotiate a settlement now that Britain has left the bloc.
©2020 Bloomberg L.P.