On October 2, 2019, the World Trade Organization (WTO) Arbitrator ruled in favor of the United States and Boeing in its dispute against the European Union and Airbus on the subsidies provided by the E.U. to Airbus. The ruling permits the U.S. to levy retaliatory tariffs on approximately $7.5 billion worth of European exports to the United States. In its decision, the Arbitrator determined that the adverse effects of the E.U.’s Airbus subsidies amounted to approximately $7.5 billion per year. The Arbitrator also found that the E.U. had not demonstrated that the U.S. failed to follow WTO principles in its challenge leading to the decision against Airbus.
The U.S. Trade Representative (USTR) has prepared a list of European goods valued at over $20 billion that could be subjected to tariffs. The full list of products can be viewed from the USTR’s website. The E.U. has also prepared tariff countermeasures of its own. Under WTO rules, the U.S. and E.U. may levy tariffs not only on aircraft parts, but on a variety of products, including food, alcohol, and motorcycles. The USTR intends to impose a ten percent duty on imports of large civil aircraft and a twenty-five percent duty on agricultural and other products.
According to the Wall Street Journal, a senior USTR official has stated that the tariffs will go into effect on October 18, 2019. The WTO’s Dispute Settlement Body is scheduled to convene on October 28, 2019 and the DSB has to approve the decision, though the U.S. has requested an earlier meeting for October 14 to authorize the retaliatory action. The WTO is not scheduled to make a decision on the E.U.’s complaint against Boeing until 2020. European diplomats have suggested that any American import duties imposed would make E.U. retaliation much more likely, causing potentially severe disruptions within supply chains.
We will continue to monitor this situation and will provide future updates as developments occur. Please contact Husch Blackwell’s International Trade and Supply Chain team for more information.