Trade and Manufacturing Monitor https://www.kelleydrye.com/viewpoints/blogs/trade-and-manufacturing-monitor News and insight from our international trade practice group Wed, 12 Jun 2024 02:04:16 -0400 60 hourly 1 EU Targets November 10 for Imposition of Nearly $4 Billion in Tariffs on U.S. Goods in Aircraft Case https://www.kelleydrye.com/viewpoints/blogs/trade-and-manufacturing-monitor/eu-targets-november-10-for-imposition-of-nearly-4-billion-in-tariffs-on-u-s-goods-in-aircraft-case https://www.kelleydrye.com/viewpoints/blogs/trade-and-manufacturing-monitor/eu-targets-november-10-for-imposition-of-nearly-4-billion-in-tariffs-on-u-s-goods-in-aircraft-case Wed, 04 Nov 2020 09:58:19 -0500 The WTO has given final approval for the EU to impose tariffs on at least $4 billion of U.S. goods in retaliation over illegal aid in connection with the Boeing/Airbus aircraft dispute. The EU has set a target date of November 10, 2020 to impose tariffs, regardless of the outcome of the U.S. presidential election. Press accounts indicate the EU Commission has given EU member states until November 3 to provide input on the targeted products.

While the U.S. and the EU have indicated general support for a settlement of the 16-year aircraft dispute, the two sides continue to disagree on settlement terms. The EU has urged the U.S. to remove tariffs over EU subsidies to Airbus because it has repealed those programs, while the U.S. contends that since it has already removed the subsidies to Boeing, there is no legitimate basis for EU retaliation. It seems unlikely the parties will reach a settlement by the November 10, 2020 deadline. The EU has stated that it will move forward with the tariffs if there is no settlement by November 10, 2020.

President Trump has warned that the U.S. will strike harder should the EU impose tariffs. The U.S. to date has not applied the maximum tariff level in the $7.5 billion damages award against the EU from the WTO in 2019. Instead, the U.S. has imposed 15% tariffs on Airbus aircraft and 25% levies on various other European exports such as French wine, Scotch whisky and Spanish olives. The U.S. could raise these import taxes to 100%, which would effectively bar many of these European products from entering the U.S. market.

It is widely anticipated that the updated list of U.S. goods subject to the new EU retaliatory tariffs will be based on the EU’s preliminary April 2019 list, which identified U.S. products under consideration for the application of additional tariffs. Products of note on the April 2019 list include: fresh and frozen fish of a variety of species; fresh and dried fruits and vegetables, sugar, cocoa powder and chocolate, nuts and seeds, orange juice and grapefruit juice, wine and alcohol, polymers, suitcases and handbags, shovel loaders and tractors, and video game consuls.

While any listed product may be subject to additional tariffs, the EU may not apply tariffs exceeding the approved level of countermeasures, totaling just under $4 billion.

Kelley Drye continues to monitor developments related to this case, including the publication of a final updated list. If you are interested in receiving updates or have any questions, please contact: Jennifer McCadney.

]]> U.S. increases tariffs on European aircraft: EU response a litmus test for transatlantic trade relations https://www.kelleydrye.com/viewpoints/blogs/trade-and-manufacturing-monitor/u-s-increases-tariffs-on-european-aircraft-eu-response-a-litmus-test-for-transatlantic-trade-relations https://www.kelleydrye.com/viewpoints/blogs/trade-and-manufacturing-monitor/u-s-increases-tariffs-on-european-aircraft-eu-response-a-litmus-test-for-transatlantic-trade-relations Wed, 19 Feb 2020 14:23:33 -0500 Last Friday the United States Trade Representative (USTR) ramped up its tariffs on European aircraft, increasing the duty from 10% to 15%, effective March 18.

It also announced it would make minor modifications to 25% tariffs imposed on cheese, wine, Irish and Scotch whisky, and other non-aircraft products from the EU, namely adding a 25% tax on French and German butcher and kitchen knives and dropping prune juice from the list of taxed items. While the move is hard-hitting, particularly for European aircraft, EU officials had feared more drastic measures in an increasingly fraught trade relationship with the U.S.

Background
The tariffs are part of a 15-year-old complaint over European aircraft subsidies to plane maker Airbus, putting Boeing, its U.S. competitor, at a disadvantage. Last October, the World Trade Organization authorized the U.S. to impose tariffs of up to 100% on 7.5 billion dollars’ worth of EU exports annually to recoup its losses. The imposed duties are lower than those permitted under WTO’s ruling, however, USTR decided against additional escalation after a mid-December public consultation recorded protestations from more than 26,000 U.S. consumers and industries. While USTR’s latest action on tariffs thus could have been significantly more painful, businesses hoping for a relief remain disappointed with the levies, which are expected to continue until the U.S. and EU come to a negotiated resolution. As the two sides cannot agree on terms for starting talks, this remains an uncertainty at least in the short-term.
Potential for Escalation
Further escalation by Washington also is anticipated if Brussels hits U.S. imports with tariffs over unfair subsidies to Boeing. The WTO is expected to rule this spring on damages caused by U.S. plane maker’s state tax breaks, which would authorize the EU to target U.S. goods with retaliatory tariffs. A preliminary list of U.S. goods proposed as targets for EU retaliatory tariffs was drawn up last year, focusing primarily on U.S. farm products. Although Brussels no doubt is mulling over a right response to the most recent U.S. tariff hikes on aircraft, the broader picture for the EU remains to reset its trade relations with the U.S.
Impact on EU-US Trade Agreement
At the beginning of the year, European Commission President Ursula von der Leyen announced that she is seeking a mini trade deal with the U.S. in the next few weeks covering trade, technology and energy. However, the U.S. insists any deal must include EU agricultural concessions – a sticky and politically explosive topic for the EU. EU officials have conceded agricultural concessions could come in the shape of separate commitments lowering EU non-tariff barriers for certain U.S. farm goods. It has been suggested this could include the approval of more genetically modified crops for sale in the bloc, which is of obvious interest to the U.S.

However, some EU countries disagree on linking agricultural concessions to a wider EU-U.S. deal and are highly reticent to wade in the politically sensitive waters of farm goods, food standards and genetically modified crops. The European Commission has sought to reassure EU Member States that agricultural concessions would remain minor and include only non-controversial sanitary and phytosanitary standards. On the other hand, minor concessions are unlikely to cut it for the U.S. It is, for instance, calling on Brussels to soften limits on pesticides residues, to which the EU is purposely taking a stricter approach, also increasingly working towards phasing out pesticides in favor of non-chemical alternatives.

Next Steps
The EU’s response to the U.S. levies on European aircraft will be telling in terms of how trade negotiations between the two sides are progressing. The EU has made clear on multiple occasions that it will not be pressured by tariffs into making concessions in trade talks. In a similar vein, it likely will not seek to use as a bargaining chip any retaliatory tariffs linked to the WTO Boeing battle. The question rather is whether the EU will risk any further souring of relations just as preparations are being made for a transatlantic trade agreement. Any bold action by the EU for retaliatory tariffs could bring talks to a breaking point. Conversely, it could also signal a breakdown of efforts to reach a mutually beneficial trade deal. The next few weeks will be telling.

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