By: Monica Fritsch
On October 13, 2020, the World Trade Organization (“WTO”) ruled that the European Union may impose tariffs on approximately $4 billion worth of American products in response to illegal subsidies given to Boeing, an American aircraft manufacturer.[1] The ruling confirmed that the United States failed to comply with WTO subsidy rules and continued to give illegal support to Boeing, which the European Union estimates has led to $12 million worth of damages to Airbus.[2] The European Union already released a list of preliminary items that it may impose tariffs on, which it can then request authorization from the WTO as soon as October 26, 2020.[3]
This ruling stems from an ongoing sixteen-year dispute between the United States and the European Union regarding subsidies given to their respective aircraft manufacturers.[4] Last year, the WTO ruled that the United States may impose $7.5 billion in tariffs on European products in a parallel case in which the United States claimed that European subsidies granted to Airbus violated obligations under The Agreement on Subsidies and Countervailing Measures and the GATT 1994.[5] The United States released a list of products it would subject to additional tariffs; many of these are still in effect today.[6]
The airline industry has been one of the hardest hit during the COVID-19 pandemic.[7] Both Boeing and Airbus announced that they will cut more than 30,000 jobs due to the significant decrease in air travel and airlines scaling back on placing orders for new aircrafts.[8] For instance, Delta Airlines, an American company that buys both Boeing and Airbus aircrafts, announced its scaled back plans to purchase new aircrafts through 2022.[9] With both the United States and the European Union experiencing a win at the WTO, it is time to call a tie in the aircraft subsidy battle and come to a mutually beneficial agreement to reduce or eliminate retaliatory tariffs. Both countries have made moves to comply with WTO rules.[10] The United States eliminated a preferential tax rate for aerospace manufacturing earlier this year and in July, Airbus agreed to modify the terms of its repayable launch aid that was granted by France and Spain.[11] Valdis Dombrovskis, the European Commissioner for Trade, released the following statement in response to the WTO’s ruling allowing the European Union to impose tariffs: “I would much prefer not to do so, additional duties are not in the economic interest of either side, particularly as we strive to recover from the COVID-19 recession.”[12] In light of his statement, American officials should likewise hesitate to continue imposing tariffs on European products. Given the difficulties arising from the COVID-19 pandemic, and in light of the fact that both the United States and the European Union have officially won on their claim that the other was imposing illegal subsidies and have moved to comply with the WTO rulings, there is hope on the horizon that this dispute can finally be cleared for landing once and for all.
[1] See Boeing Subsidy Case: World Trade Organization Confirms EU Right to Retaliate Against $4 Billion of U.S. Imports, European Comm’n, (Oct. 13, 2020), https://trade.ec.europa.eu/doclib/press/index.cfm?id=2192.
[2] See id.; see also Ashutosh Pandey, Airbus-Boeing WTO Dispute: What You Need to Know, Deutsche Welle, (Oct. 12, 2020), https://www.dw.com/en/airbus-boeing-wto-dispute-what-you-need-to-know/a-49442616.
[3] See European Comm’n, supra note 1 (including a link to a preliminary list of products eligible for increased tariffs); Ana Swanson & Niraj Chokski, Europe Can Impose Tariffs on U.S. in Long-Running Aircraft Battle, The New York Times, (Oct. 13, 2020), https://www.nytimes.com/2020/10/13/business/economy/boeing-europe-tariffs-trade.html.
[4] Swanson & Chokski, supra note 3.
[5] DS316: European Communities and Certain Member States – Measures Affecting Trade in Large Civil Aircraft, The World Trade Org., https://www.wto.org/english/tratop_e/dispu_e/cases_e/ds316_e.htm (last updated Sept. 23, 2020).
[6] See Notice of Determination and Action Pursuant to Section 301: Enforcement of U.S. WTO Rights in Large Civil Aircraft Duties, 84 Fed. Reg. 54,245, 54,245-51 (Oct. 9, 2019); European Comm’n, supra note 1 (stating that these duties are still in place despite efforts taken by European countries to comply with the WTO airbus decision); Pandey, supra note 2 (stating that the United States has revised its tariffs twice to keep pressure on the European Union).
[7] Swanson & Chokski, supra note 3.
[8] See id.
[9] See id.
[10] See Pandey, supra note 2.
[11] See id.
[12] See European Comm’n, supra note 1.
