The EU is allowed to impose punitive tariffs on goods from the USA – but much less than desired. The USA supported Boeing with illegal subsidies. The dispute concerned tax gifts to the aircraft manufacturer.
Because of years of illegal subsidies for the US aircraft manufacturer Boeing, the European Union is now allowed to impose punitive duties on US imports amounting to almost four billion dollars (3.4 billion euros) a year. This was determined by independent arbitrators, who reported to the World Trade Organization (WTO) in Geneva on Tuesday. The arbitrators thus remained far below the demands of the EU.
The EU had claimed 12 billion dollars in damages, and in talks with the arbitrators 8.6 billion because Airbus had been disadvantaged for years by the state aid given to its competitor Boeing. In a similar case, arbitrators had already approved punitive tariffs of 7.5 billion dollars on products from the EU for illegal subsidies for Airbus.
The ruling was the provisional conclusion to the two disputes between the trade giants USA and EU, which have been going on for more than 15 years. An appeal is excluded. The EU has already threatened to impose duties on ketchup, game consoles and other products.
In March 2019, the WTO arbitrators had already conclusively determined that the USA had not stopped the government aid for Boeing that had been objected to years before. Since then, arbitrators have been busy determining the amount of the permitted punitive tariffs. The subsidies included research funds from the space agency NASA and tax breaks. State subsidies were also given to the Americans’ former bestseller, the long-range Boeing 787, known as the Dreamliner.
US punitive duties on goods worth 7.5 billion dollars for EU imports
A good 15 years ago, the EU and the USA had sued each other at the WTO for subsidies to Airbus and Boeing. The US lawsuit against Airbus was concluded somewhat faster. As early as May 2018, arbitrators in the Airbus case determined that Brussels had not stopped the subsidies complained of. In October 2019, they therefore authorized the USA to impose punitive tariffs on goods worth 7.5 billion dollars a year. This was the highest amount approved since the WTO was founded in 1995.
The USA immediately implemented the ruling: It made the import of cheese, butter and wine and many other products from Europe more expensive, as well as components for the aviation industry. The punitive tariffs are between 15 and 25 percent. They mainly penalized the countries that paid Airbus subsidies: Germany, France, Spain and Great Britain.
The winning party in a trade dispute is allowed to impose punitive tariffs until the losing party has eliminated the objectionable subsidies. The EU has been asserting for months that all Airbus subsidies have been stopped and the punitive tariffs must be stopped. It has called for a new assessment by the arbitrators, but its application is not making any progress in the crisis-ridden WTO. The USA also says that the objected Boeing aid no longer exists.
The EU last offered the USA in July to negotiate a settlement of the disputes and an end to all punitive tariffs. Washington did not initially respond to this offer.