MIAMI – The World Trade Organization (WTO) has approved new tariffs worth US$4bn per year imposed by the European Union (EU). The list of US goods includes Boeing aircraft sold in Europe.
Previously, the WTO ruled against the EU by allowing US tariffs that increased the price of European products in the US for over a year, affecting the final price of Airbus aircraft in the US.
According to the Seattle Times, the WTO’s decision to approve the EU tariffs could not be worse for Boeing. The US manufacturer is racing to increase deliveries of the 737 MAX jet for early next year. However, with the introduction of the new tariffs, the EU could impose a 15% increase in the price of the next aircraft deliveries for European airlines.
Taking into consideration the upcoming US presidential election, the ruling might not be effective in the next two months. Before the implementation, the proposed tariffs must pass through transatlantic negotiations to reach a long-time settlement.
Even though that tax provision is not a fact yet, Boeing has already commented on the matter. In a statement, it said that it was disappointing that Airbus and the EU continue to seek to impose tariffs on US companies and their workers. According to the manufacturer, this ruling has “been fully and verifiably repealed.”
Contestation from the US Government
In a major response, the US government claimed that the EU had no legal basis to impose such tariffs on an aircraft dispute. In the statement, US Trade Representative Robert Lighthizer said that the state of Washington had repealed the mentioned tax break in early 2020. Without harm, there is no reason for a WTO member to apply subsequent action, alleged Lighthizer.
The US Trade Representative also said that WTO’s decision did not authorize the EU to retaliate against subsidies provided to Boeing. These include research and development areas. Accordingly, if the EU does not make any move to stop the ruling, the US would respond, affirmed Lighthizer. The action would be based on the fact that the retaliation is plainly contrary to WTO principles.
While Boeing insists that instead of imposing tariffs, Airbus and the EU should be doing “good-faith efforts” to solve the dispute, Airbus CEO Guillaume Faury said that his company did not start this WTO dispute.
Faury added that the manufacturer does not wish to continue harming customers and suppliers in the aviation industry more than they already have been. In fact, Airbus remained prepared and ready to support a negotiation process, stated Faury.
The WTO EU tariff approval comes as a response to the US government subsidies to Boeing to offset market failures and externalities. Conversely, the US imposed tariffs worth US$7.5bn on European goods for the subsidies given to Airbus. As a result, Airbus jets sold in the US had a 10% tax provision that later went up to 15%.
Featured photo: Boeing 777 aircraft. Photo: Boeing.