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U.S. to tax EU products after WTO ruling on aircraft subsidies

The United States plans to impose tariffs on a wide range of goods from the European Union (EU) starting Oct. 18, said the Office of the U.S. Trade Representative (USTR) on Wednesday.

The move, it said, comes after the World Trade Organization (WTO) gave it permission to levy tariffs on 7.5 billion U.S. dollars of European exports.

In an arbitration decision announced earlier in the day, the WTO said the amount is commensurate with the adverse effects suffered by Airbus’ U.S. rival Boeing in terms of lost sales and impeded deliveries of its aircraft.

According to the statement from the USTR, new airplanes and other aircrafts from Britain, France, Germany and Spain are subject to additional tariffs of 10 percent, while Scotch whiskies, cheese, olives, yogurt, and sweaters from Britain are among the products to be hit by an additional tariff of 25 percent.

“The United States today has requested that the WTO schedule a meeting on October 14 to approve a U.S. request for authorization to take countermeasures against the EU. Pursuant to WTO rules, the WTO will provide this authorization automatically at that meeting,” the statement said. “The EU is not allowed to retaliate against WTO-authorized countermeasures.”

“We expect to enter into negotiations with the European Union aimed at resolving this issue,” USTR Robert Lighthizer said.

“We remain of the view that even if the United States obtains authorization from the WTO Dispute Settlement Body, opting for applying countermeasures now would be short-sighted and counterproductive,” the EU released a statement quoting its Trade Commissioner Cecilia Malmstrom as saying, following the WTO arbitration decision.

“Both the EU and the U.S. have been found at fault by the WTO dispute settlement system for continuing to provide certain unlawful subsidies to their aircraft manufacturers,” the EU statement said, adding that “in the parallel Boeing case, the EU will in some months equally be granted rights to impose countermeasures against the U.S. as a result of its continued failure to comply with WTO rules.”

The French Foreign Ministry said on Wednesday that France and its European partners would take firm countermeasures if Washington goes ahead with imposing tariffs on EU imports as retaliation for European aircraft subsidies.

The EU would prefer “an amicable settlement” in this 15-year-old dispute and the development of new common rules on government support for aviation companies, said French Foreign Ministry spokesperson Agnes von der Muhll. “Unfortunately, the United States does not seem ready to negotiate at this stage.”

According to von der Muhll, the European bloc would impose sanctions on the United States “in several months” in relation to complaints concerning some 5-billion-dollar subsidies to Boeing between 1989 and 2006 despite a previous WTO ruling to stop illegal aid to the U.S. aircraft maker.

Airbus said in a statement that if the USTR chooses to impose tariffs on the importation of aircraft and/or aircraft components, that will create “insecurity and disruption” not only to the aerospace industry, but also to the broader global economy.

Noting that the additional tariffs are “still avoidable,” Airbus said the only way to prevent the negative effects of these tariffs would be for the United States and EU to find a resolution to this long-running dispute through a negotiated settlement.

“Airbus continues to encourage the U.S. Administration and the European Commission to find a settlement to this dispute, and thereby preserve the free, fair competition and open trade that have proven beneficial to the public and essential for a successful and growing global aviation industry,” it said.

In 2004, the United States filed a case with the WTO, accusing the EU of providing illegal subsidies to Airbus in various forms. The EU has since filed a similar case over allegedly illegal U.S. subsidies to Boeing. The WTO has ruled that both the United States and the EU have provided illegal subsidies for their respective airlines.

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