The World Trade Organization (WTO) issued its decision on the level of countermeasures the United States may request with respect to the European Union (EU) and which would be affecting trade in large civil aircraft.
Regarding that aerospace giant Airbus (AIR) subsidy dispute started by the United States government on October 6, 2004 against its counterparts of Germany; France, the United Kingdom and Spain, the WTO ruled that the European rival to U.S. Boeing (BA) received illegal subsidies. “The United States is concerned that the (subsidies) measures have caused and continue to cause nullification or impairment of benefits to the United States under the General Agreement on Tariffs and Trade (GATT) 1994,” said the initial complaint.
Hours after the WTO ruling, U.S. President Donald Trump welcomed the $7.5 billion award as a “nice victory” and accused the EU of treating the U.S. “very badly on trade due to tariffs, trade barriers, and more.” U.S. Trade Representative Robert Lighthizer said in a statement that “after 15 years of litigation, the WTO has confirmed that the United States is entitled to impose countermeasures in response to the EU’s illegal subsidies.”
In Europe, Airbus reiterated call for talks to reduce trade tensions and a company’s communiqué underlined that “if the United States Trade Representative (USTR) chooses to impose tariffs on the importation of aircraft and/or aircraft components, this will create insecurity and disruption not only to the aerospace industry, but also to the broader global economy. Yet it is still avoidable.”
In Brussels, EU Commissioner for Trade Cecilia Malmström stressed that “opting for applying countermeasures now would be short-sighted and counterproductive” and recalled that “both the EU and the U.S. have been found at fault by the WTO dispute settlement system” in similar circumstances.
In that context, new 10 percent U.S. tariffs on aircraft and 25 percent on food and industrial products like French wine, Italian cheese and other items are set to take effect October 18, 2019, further deepening a trade war which increases fears on global growth perspectives and somehow ends the globalization taking place since the 1990s.
According to Cyceon, “the latest step taken by the U.S. government shows it sees the EU as a trade competitor just like it sees China, despite very close strategic, military and cultural ties. It’s a meaningful development that could likely modify the functioning of the global economy in the long run and that should fuel more sovereignty and competition on behalf of the EU in its relationship with the U.S.”