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US set to strike EU with $7.5B in tariffs over Airbus subsidies

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The case began in 2004, when Washington accused Britain, France, Germany and Spain of providing illegal subsidies and grants to support the production of a range of Airbus products. GUILLAUME SOUVANT/AFP

US set to strike EU with $7.5B in tariffs over Airbus subsidies

Hours after getting the green light from the World Trade Organisation (WTO), Washington moved on Wednesday to retaliate against the EU over illegal subsidies for Airbus, announcing tariffs on $7.5 billion worth of European goods starting on October 18.

The ruling is the largest arbitration award in WTO history and a landmark moment in the longstanding Airbus-Boeing battle, which threatens to intensify already strained trade relations between the US and the EU.

The top US trade negotiator said he expects to begin talks with Brussels soon to try to resolve the dispute. But President Donald Trump hailed the decision, calling it a “big win” for the US and claiming credit for the outcome of the 15-year-old case.

“We’re having a lot of wins at the WTO,” Trump said. “All of those countries were ripping off the United States for many years and they know I’m wise to it.”

The EU will face tariffs of 10 per cent on aircraft and 25 per cent on other goods, like cheeses, whisky, olive oil and some industrial products, largely from the four countries that support Airbus – France, Germany, Spain and Britain.

“For years, Europe has been providing massive subsidies to Airbus that have seriously injured the US aerospace industry and our workers,”

US Trade Representative Robert Lighthizer said in a statement.

“We expect to enter into negotiations with the European Union aimed at resolving this issue in a way that will benefit American workers,” he said.

Although the WTO ruling allows Washington to penalise the EU with duties of up to 100 per cent, the US has limited the tariffs for now but “has the authority to increase the tariffs at any time, or change the products affected,” the statement from Lighthizer’s office said.

Brussels earlier on Wednesday also indicated a willingness to negotiate.

“Our readiness to find a fair settlement remains unchanged,” the EU statement said, adding that the bloc had “shared concrete proposals with the US for a new regime on aircraft subsidies” but had not yet received a response.

US trade officials countered that they had not heard serious offers from Brussels until recent weeks when it became apparent the WTO decision was imminent.

Though the case has been wending its way through the global trade court for years, the final decision adds more fuel to the simmering disputes between the economic powers already at odds over US tariffs on steel and aluminium and the perilous threat of taxes on European autos.

The EU immediately threatened to respond to any US move with tariffs of its own.

However, a US trade official said that would be illegal under WTO rules and Washington would be prepared to respond.

The case began in 2004, over what Washington called massive corporate welfare for Airbus – a direct competitor to US aerospace firm Boeing.

It has since been mired in the WTO’s complex dispute settlement system, which allows for a range of appeals.

But Wednesday’s decision, which cannot be appealed, marks the first time the US has been cleared under international trade law to slap countermeasures on EU products.

With its Brexit deadline less than a month away, Britain said in a statement that it “should not be subject” to any sanctions.

However, a senior US trade official told reporters the EU collectively bears responsibility for the failure to resolve the subsidy issue, indicating there would be no exemptions.

And the official indicated the other EU member countries that will be hit by tariffs could help convince Brussels to end the subsidies to the aircraft manufacturer.

Counter case

Brussels will also soon get the chance to impose its own WTO-approved tariffs.

In a separate case launched in 2005, the EU alleged that Boeing had received $19.1 billion worth of prohibited subsidies from 1989 to 2006 from various branches of the US government.

After earning a series of victories in that equally epic case, Brussels asked a WTO arbitrator to give it permission to slap retaliatory tariffs on $12 billion in US goods.

The WTO is likely to decide on a lower number in a decision expected in about six months.

The Europeans made a proposal in July to call a truce in which both sides would admit fault and figure out ways to curtail airline subsidies. The EU and US have reached such settlements in the past.

According to government data, the US imported about $3.5 billion in aircraft from the EU last year.

US officials said they had decided against tariffs on EU imports of aircraft parts.

US carrier Delta warned on Wednesday that increasing taxes on aircraft ordered years ago “will inflict serious harm on US airlines”.

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