Overview
On October 2, 2019, an arbitrator of the World Trade Organization (WTO) issued a decision on the level of countermeasures the United States (US) is authorized to impose to offset European Union (EU) subsidies in support of aircraft manufacturer Airbus. The arbitral award concluded the nearly 15-year-old dispute between the two parties, in which the United States challenged various subsidies provided by the European Communities and the governments of France, Germany, Spain, and the United Kingdom to Airbus. The award authorized the United States to impose duties of up to 100% on $7.5bn worth of goods from the European Union per year – less than the $10.5bn requested by the United States, but still the largest award granted in the history of the WTO.
On the same day, the Office of the United States Trade Representative (USTR) announced the list of goods on which duties will be assessed and that the duties will be imposed effective October 18, 2019. Although the list targets principally goods from France, Germany, Spain, and the United Kingdom, merchandise from every EU member country is affected. The list includes products such as French wine, British sweaters and whiskies, Spanish olives, German coffee and industrial goods, and a range of agricultural products from across the EU member states. Notably, aircraft parts will not be subject to the additional duties. A 10% duty will be applied to large civil aircraft, the subject of the dispute, while a 25% duty will be applied to all other goods listed – far less than the 100% duty rate authorized by the arbitral award. The list is expected to be published in the Federal Register in the coming days.
Although the United States can impose the countermeasures as soon as they are authorized by the WTO’s Dispute Settlement Body (which is likely to occur by mid-October), the question of whether the EU subsidies have, in fact, been removed, which is currently being examined by a WTO compliance panel, could cause the additional duties to be short-lived. Should the compliance panel determine that the EU has appropriately removed the subsidies in question, the United States would be forced to remove the countermeasures.
The European Union’s parallel case against US subsidies in support of Boeing is still underway, and is expected to conclude in the first half of 2020. A favorable outcome in the case for the European Union would permit the EU to impose its own set of duties on US goods at this time. Government officials from the US and the EU have expressed some interest in a negotiated settlement of the Boeing - Airbus subsidization issue, though to date those negotiations have not been fruitful.
