The US-Europe trade war escalates again!
The WTO agrees to the EU to increase taxes on US$4 billion in goods
According to a Reuters report on September 30, sources said that the World Trade Organization (WTO) has allowed the European Union to impose tariffs on US$4 billion worth of US goods as a countermeasure to Boeing’s US subsidies.
The WTO arbitration body will announce this decision in the coming weeks.
According to the report, this upcoming ruling is a follow-up response to the US imposing taxes on EU imports worth approximately US$7.5 billion.
U.S.-Europe trade war continues to escalate
In October 2019, the WTO ruled that the United States has the right to impose tariffs on approximately US$7.5 billion of goods and services exported from the EU to the United States each year in response to the EU’s illegal subsidies to European Airbus.
After the ruling was issued, the United States announced an additional 10% tariff on EU-produced aircraft and an additional 25% tariff on certain EU agricultural products and other products.
In February 2020, the United States raised tariffs on aircraft to 15%, while tariffs on other commodities remained unchanged.
Judging from the taxation list previously issued by the Office of the United States Trade Representative, the product coverage is quite extensive, including airplanes, whiskey, coffee, cheese, frozen meat, butter, yogurt, various clothing and blankets.
Many European countries, including the United Kingdom, France, Germany, and Spain, will be affected (the United Kingdom had not yet left the European Union).
EU Trade Commissioner Malmström said earlier that the EU expressed regret over the US decision to raise tariffs again.
This leaves the EU no choice but to take tariff retaliation measures against Boeing's illegal subsidies.
In July 2020, the European Union asked the United States to immediately cancel its decision to impose tariffs on Airbus.
At that time, EU Trade Commissioner Phil Hogan stated that the WTO will soon make a ruling on the EU's prosecution of Boeing's illegal subsidies. If the US is unwilling to reach a settlement with the EU, the EU will reserve the right to take sanctions against the US.
The trade war around Boeing and Airbus began 16 years ago
In fact, the anti-subsidy dispute between the United States and Europe, which focuses on the two major aviation giants, Boeing and Airbus, has a long history.
As early as 1992, the United States and Europe reached an agreement on trade and subsidies for large civil aircraft.
The agreement stipulates that the government’s direct subsidies for large-scale civil aircraft research and development cannot exceed 33% of the aircraft’s research and development costs. The government’s indirect subsidies for large-scale civil aircraft (such as subsidies provided by the National Aeronautics and Space Administration and the Ministry of Defense or tax incentives) should be limited 3% of the national large-scale civil aviation industry turnover.
At that time, Airbus had a much lower market share than Boeing.
As Airbus's market share rose rapidly and surpassed Boeing in 2003, the US government believed that the 1992 agreement had lost its effect and unilaterally tore the agreement.
On October 6, 2004, the United States filed a lawsuit with the WTO, accusing the European Union of providing illegal subsidies to Airbus in various forms.
The European Union subsequently sued the WTO to provide illegal subsidies to Boeing from the US government.
This dispute reached its climax in 2010 and 2011, when the WTO ruled successively that both the EU and the United States had problems providing illegal subsidies to their respective aviation companies.
In 2010, the WTO asked the EU to stop providing excessive assistance to aircraft including Airbus A380.
In 2011, the WTO ruled that NASA and various US state governments should ban the funding of Boeing.
In 2012, the European Union and the United States both claimed that they had complied with the relevant rulings, and pointed out that the other party did not comply.
In 2013, Boeing announced the launch of the twin-engine 777X aircraft and announced that it would continue to use the tax relief policy to manufacture aircraft.
In 2014, the European Union filed a separate complaint with the WTO over the use of the indirect subsidy tax to manufacture aircraft by the United States.
In 2018, the United States threatened to impose taxes on billions of dollars of European products, and began a trade war between the two sides on taxation of imported goods.
According to the WTO ruling and the official authorization of the Airbus subsidy case, the United States formally imposed additional tariffs on US$7.5 billion of EU products exported to the United States on October 18 last year.
The WTO will also announce its decision to allow the EU to impose tariffs on US$4 billion worth of US goods in the coming weeks.