EU Seeks to Halt U.S. Tariffs Over Airbus Aid in Last-Gasp Plea




 

(Bloomberg) -- The European Union made a last-ditch appeal to the U.S. to refrain from triggering retaliatory tariffs over illegal subsidies to Airbus SE, warning of economic harm to both sides and repeating a call for a negotiated solution.

European Trade Commissioner Cecilia Malmstrom told her U.S. counterpart, Robert Lighthizer, that his plan to hit $7.5 billion of EU goods ranging from planes to whiskey with duties would compel the EU to apply countermeasures in a parallel lawsuit over market-distorting aid to Boeing Co. U.S. levies would make a negotiated settlement harder to reach, she said.

"I strongly believe that imposing additional tariffs in two aircraft cases is not a solution," Malmstrom said in an Oct. 11 letter to Lighthizer seen by Bloomberg News. "It would only inflict damage on businesses and put at risk jobs on both sides of the Atlantic, harm global trade and the broader aviation industry at a sensitive time."

The World Trade Organization is due to give final approval for U.S. retaliation in the Airbus case on Monday, allowing tariffs to kick in as planned on Friday.

The trans-Atlantic dispute over aircraft aid risks fraying a trade truce struck between the U.S. and EU in July 2018. At the time, both sides pledged to try to scale back commercial barriers and avoid a repeat of tit-for-tat tariffs that began with President Donald Trump's duties on European steel and aluminum on U.S. national-security grounds.

The WTO cases over subsidies to Airbus and Boeing are 15 years old. Because of the calendar, the U.S. is entitled to strike first and the EU would follow suit sometime in 2020.

Malmstrom gave no sign in her letter to Lighthizer that an idea floated in some EU circles for quicker European retaliation is gaining ground. The idea weighed was to hit back by invoking an unrelated, older WTO case against a now-defunct U.S. tax break given to companies, including Boeing, via subsidiaries known as foreign sales corporations.

Instead, Malmstrom said the EU's planned countermeasures of $12 billion would be applied "when the time comes on the parallel Boeing case."

Aside from causing economic harm, hastier European retaliation could undermine the EU's claim to be working to uphold the WTO system that Trump's protectionism is shaking.

"We are ready to negotiate a settlement for both the Airbus and the Boeing case addressing remaining compliance obligations on both sides, putting these cases behind us," Malmstrom said.

To contact the reporter on this story: Jonathan Stearns in Brussels at jstearns2@bloomberg.net

To contact the editors responsible for this story: Ben Sills at bsills@bloomberg.net, Tony Czuczka, Linus Chua

For more articles like this, please visit us at bloomberg.com

©2019 Bloomberg L.P.

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