On April 8, 2019, the Office of the United States Trade Representative (USTR) announced that it is preparing a list of European Union products on which it intends to impose retaliatory tariffs of $11.2 billion per year, in response to the European subsidies given to Airbus. The preliminary list of products on which USTR is considering imposing additional import duties includes a wide variety of items, such as certain new aircraft and aircraft parts, seafood, yogurt, butter, cheese, citrus fruits, virgin olive oil, wine, printed books, threads, carpets and other textiles, men’s and women’s apparel, iron and steel articles, such as nails, and parts and accessories of bicycles. The full list of items USTR proposes to include in this round of tariffs is available here.
Today, USTR announced, and plans to publish on April 12, notice of the initiation of a Section 301 investigation addressing this issue. As part of the investigation, titled "Enforcement of U.S. WTO Rights in Large Civil Aircraft Dispute," USTR is seeking public comments regarding the proposed new tariffs. While public comments can address any aspect of the proposed action, USTR provided the following specific examples as potential topics to be covered in public comments:
- The specific products to be subject to increased duties, including whether products listed in the Annex should be retained or removed, or whether products not currently on the list should be added;
- The level of the increase, if any, in the rate of duty;
- The appropriate aggregate level of trade to be covered by additional duties; and
- Whether increased duties on particular products might have an adverse effect upon U.S. stakeholders, including small businesses and consumers.
A public hearing has also been scheduled, and interested parties can submit requests to testify at the hearing. The relevant dates, as currently set, are listed below:
This new round of planned tariffs stems from a World Trade Organization (WTO) ruling last May, which found that Boeing rival Airbus had received illegal funding for several of its aircraft models. In the dispute, which began in 2004, the United States argued that the EU gave Airbus billions of dollars of "launch aid" that resulted in an unfair advantage for Airbus. Specifically, the United States asserted that the aid allowed Airbus to gain market share in Europe, Australia, China, South Korea, and elsewhere at Boeing's expense. The WTO's finding in its favor prompted the United States to request authorization to impose retaliatory tariffs of $11.2 billion per year on the EU. The WTO is expected to rule on the request this summer, and is widely expected to grant the request. The USTR indicated that it is prepared to put the proposed new tariffs into effect as soon as the WTO's ruling is issued.
In response, the European Union announced that it was also readying a list of tariffs to counter U.S. subsidies to Boeing. It is anticipated that the WTO will also rule soon on a parallel dispute brought by the EU against the United States for allegedly providing illegal subsidies to Boeing. Last month, the WTO found that Boeing received tax breaks in Washington state and incentives in South Carolina that amounted to subsidies. The EU has further alleged that government research contracts granted to Boeing through agencies like the Defense Department and NASA, as well as tax breaks, are also subsidies.
The announcement of the proposed imposition of new tariffs comes amid tense trade relations between the United States and the EU. While both sides have indicated a desire to negotiate to relieve the current tensions and normalize trade, there has been little progress to date, and continued threats from the United States to impose auto tariffs, along with the corresponding threats from the EU to retaliate, are further exacerbating the situation. Should the proposed new tariffs take effect, we are likely to see a continued, and potentially prolonged, escalation of trade tensions across the Atlantic.
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Venable's International Trade Group continues to monitor trade developments. If you have any questions regarding how proposed tariffs may affect your business, or you wish to submit public comments or testify at the public hearing, Venable's International Trade Group is available to advise and assist.