EU Granted Permission by WTO to Raise Tariffs on $4 Billion in US Goods
The World Trade Organization announced that the European Union is entitled to hike tariffs on nearly $4 billion in U.S. goods due to the trade distorting effects of tax breaks for Boeing. The tariffs -- the levels of which have not been announced -- are not to go into effect immediately, but could affect civil aircraft, helicopters, tractors, chemicals, hazelnuts, wines, liquor, cotton and other products, according to a preliminary list of targets released last year.
EU Trade Commissioner Valdis Dombrovskis said he would strongly prefer not to hike tariffs on U.S. imports, since they're not in the economic interest for Europe, either. “I have been engaging with my American counterpart, Ambassador [Robert] Lighthizer, and it is my hope that the U.S. will now drop the tariffs imposed on EU exports last year,” he said. Those tariffs are 25% on some goods and 15% on aircraft. According to historical levels of imports, aircraft is about 39% of the value of the retaliation, but whiskeys, liqueurs and wines, combined, accounted for 38% of the imports facing higher tariffs. Imports of the beverages dropped after the tariffs were hiked, and the pandemic has destroyed demand for new aircraft. The aircraft tariff was hiked from 10% to 15% in March 2020.
Dombrovskis said rolling back the tariffs on European goods would generate political momentum “and help us to find common ground in other key areas. The EU will continue to vigorously pursue this outcome. If it does not happen, we will be forced to exercise our rights and impose similar tariffs. While we are fully prepared for this possibility, we will do so reluctantly.”
The office of the U.S. Trade Representative responded to the Oct. 13 news by arguing that the EU cannot legally retaliate for the past harm because the Washington state tax breaks were repealed this year. The WTO arbitrators said that argument, made in Geneva, was not timely and was moot. USTR Robert Lighthizer said, “Any imposition of tariffs based on a measure that has been eliminated is plainly contrary to WTO principles and will force a U.S. response.” But he said that the U.S. is determined to find a negotiated resolution, and said they will intensify their negotiations.
Senate Finance Committee Chairman Chuck Grassley, R-Iowa, told reporters that the administration told him that the U.S. would not negotiate with the EU until this decision came down. The decision has been known to the EU for two weeks. “I’m surprised we aren’t sitting down and negotiating,” he said.
The Distilled Spirits Council said it wants the two sides to lift the tariffs on its products immediately while they negotiate, instead of escalating. “The EU previously indicated it may impose tariffs on U.S. rum, brandy and vodka in this dispute. The escalation of tariffs on the distilled spirits sector, by either the U.S. or EU, will only increase harm to our industry, which is unrelated to the trade dispute,” the trade group said. The EU has tariffs on U.S. liquor in retaliation for steel and aluminum tariffs under Section 232.
More than 150 House of Representatives members, from both parties, in July asked that European beverages and food be removed from the tariff list, though they said the $7.5 billion retaliation should continue (see 2007290050).