The World Trade Organization on Tuesday allowed the European Union to go ahead with tariffs on some $4 billion worth of U.S. goods, in retaliation for state subsidies extended to plane maker Boeing.
- The decision, which was expected, follows a similar and symmetrical WTO decision last year greenlighting U.S. tariffs on $7.5 billion worth of European imports, including French wine and Scottish whiskey, triggered by EU subsidies to Boeing competitor Airbus.
- The EU is theoretically authorized to levy tariffs on a range of U.S. goods, from wine to suitcases and from airplanes to dry onions.
- European Commissioner Valdis Dombrovskis said on Tuesday that the EU would “much prefer not to” levy the tariff, and urged U.S. Trade Representative Robert Lighthizer to withdraw the Airbus-related sanctions.
- The trans-Atlantic dispute, which started in 2004 when the U.S. asked the WTO to rule on Airbus government subsidies, is the longest-running in the organization’s 25-year history.
The outlook: The decision provides a good opportunity for both sides to settle and withdraw their tariffs, or threat thereof. This should not be difficult: The tax breaks at the heart of the dispute have been scrapped by the state of Washington, in the case of Boeing, and production of the subsidized Airbus plane has since been stopped, for lack of demand.
But the subsidies row is just one element of the wider U.S.-EU trade tensions, which could delay an agreement. In any case, there is little chance the EU will decide anything before the U.S. presidential election in three weeks’ time, and afterward, the trans-Atlantic context may change radically.