The World Trade Organization ruled Oct. 2 that the U.S. can impose tariffs on approximately $7.50 billion worth of imports from the European Union as retaliation for subsidies provided by the bloc to Netherlands-based Airbus SE.
The WTO ruling said the EU "has not taken appropriate steps to remove the adverse effects of the subsidy or withdraw the subsidy," providing the basis for the decision to allow the U.S. to take countermeasures.
Any countermeasures from the U.S. would be "short-sighted and counterproductive," European Commissioner for Trade Cecilia Malmström said in a statement.
"The mutual imposition of countermeasures, however, would only inflict damage on businesses and citizens on both sides of the Atlantic, and harm global trade and the broader aviation industry at a sensitive time," Malmström said.
The U.S. and EU have been locked in a dispute over aircraft subsidies since 2004, when the U.S. filed a case with the World Trade Organization accusing the EU of unfairly subsidizing Airbus. The EU responded by bringing its own challenge to the WTO regarding U.S. subsidies to Airbus rival Boeing Co. The WTO is expected to decide on that case in 2020.
A report issued by a WTO appellate panel in May 2017 found that EU subsidies to Airbus caused lost sales of the Boeing 747 aircraft as well as other Boeing exports, prompting the U.S. to request authority to impose countermeasures of $11.2 billion per year to compensate for the estimated damage.
In July, the U.S. Trade Representative proposed the addition of 89 product categories with an approximate trade value of $4 billion to an initial list of EU imports worth about $21 billion that could be subject to tariffs in relation to the aircraft subsidy spat. The list includes items like frozen ham, cheese and olives as-well as cast iron, refined copper and certain copper alloys.
The EU has threatened retaliatory tariffs on $20 billion worth of annual U.S. exports to the bloc, including non-military aircraft and certain types of rum, fruits, coffee, cheese and tobacco.
Malmström said the EU is ready to work with the U.S. on finding a "fair and balanced solution" for the dispute, having shared concrete proposals with Washington, which has yet to respond, for a new regime on aircraft subsidies.
"Our readiness to find a fair settlement remains unchanged," Malmström said. "But if the U.S. decides to impose WTO authorized countermeasures, it will be pushing the EU into a situation where we will have no other option than do the same."
