According to Reuters, from 00:01 local time on January 12, the United States imposed a 15% tariff on aircraft parts such as aircraft parts such as fuselage and wings from France and Germany, and 25% on red wines with alcohol levels above 14% from France and Germany, which is the first time that the United States has imposed a 15% tariff on EU reds with alcohol content above 14% alcohol.
Tariffs are imposed on alcohol. The move is regarded as the latest retaliatory measure imposed by the United States against the EU after failing to resolve the 17-year-old aircraft subsidy dispute with the EU.
From Washington to Brussels: Aviation subsidy dispute remains unresolved for 17 years
In the 1990s, the United States and the European Union began a trade dispute against Boeing and Airbus. At that time, European Airbus began to seize the civil aviation market previously controlled by the established aviation manufacturer Boeing.
AIRBUS VS BOEING
AIRBUS VS BOEING By 1992, Airbus had occupied about 30% of the market share of civil airliners. Subsequently, the United States began to accuse the European Union of providing subsidies to Airbus in violation of regulations, but the two sides soon reached an understanding agreement.
The agreement allows the EU to provide up to one-third of Airbus’s funding for the development of new airliners, and Boeing can also benefit from the research and development work supported by the United States government.
The two sides have been at peace for more than ten years, but the shipments of Airbus have increased rapidly in these past ten years, and in 2004, they surpassed Boeing, occupying nearly half of the world’s civil aircraft market at that time.
In this case, the United States announced its unilateral withdrawal from the agreement reached by the two sides in 1992 and filed a lawsuit with the World Trade Organization (WTO) in the same year, planning to calculate illegal subsidies from the European Union from the 1970s.
The United States said that Airbus had received a subsidy of $22 billion in illegal funds, which affected Boeing’s shipments.
However, the European Union did not give in, and a few months later sued the WTO that the U.S. government had provided Boeing with a huge illegal subsidy of about 23 billion US dollars. The 17-year-old aviation subsidy dispute between the two sides has started, which is also the longest and most complex lawsuit accepted by the WTO so far.
On the one hand, it is the largest economy in all organizations in the world, and on the other hand, it is the largest economy in all countries in the world. First, it ruled that the European Union illegally subsidized Airbus, and then arbitrated the United States against the illegal subsidies of Boeing. According to the WTO, the United States and Europe have illegal subsidies to airlines, and neither has fulfilled the ruling to stop subsidies.
According to the relevant provisions of the WTO, if the defendant fails to implement the WTO award within a reasonable time, or the parties to the dispute do not agree on compensation, the complainant can apply to the WTO dispute settlement mechanism and start retaliation.
With the recognition of the WTO, the United States and the European Union are waving “tariff sticks” to each other.
Pins Tip to McMang: Endless Tariff Fight
While claiming to adjust the subsidy policy in accordance with WTO decisions, the United States and the European Union are rushing to appeal and launch new lawsuits. Let’s skip the more than ten years of tedious complaint process between the two sides and directly allocate the time to 2019.
In October 2019, the United States obtained a formal authorization to impose tariffs.
The WTO ruled that the European Union and some of its member states (the United Kingdom, France, Germany, Spain) still illegally subsidize Airbus, authorizing the United States to impose retaliatory tariffs on imports of EU goods worth up to $7.5 billion a year.
At this point, the United States raised a “tariff stick” to its close allies. The EU products hit by tariff increases include civilian aircraft, red wine, spirits, cheese and tractors.
In February 2020, the U.S. government increased the tariff on large European Union civilian aircraft in 2019 from 10% to 15%.
The European Union’s counterattack was “forced” a step later.
Originally, in April 2019, the European Commission also published a list of products to be tariffd on the United States in response to the preliminary list of products exported to Europe and the United States, saying that it would impose tariffs on U.S. imports worth $12 billion in retaliation for the United States for the United States’ failure to comply with the WTO ruling to stop subsidies to Boeing.
The list includes ketchup, nuts, video game console and bicycle pedals.
However, it was not until October 2020, a year later that the WTO made another arbitral award allowing the EU to “return to the United States”, and the European Union could impose penalties such as tariffs on U.S. goods and services totaling about $4 billion on the grounds that the United States illegally subsidized Boeing.
The European Union imposed tariffs on American products in November of the same year.
The WTO said that the ruling was final and stipulated that the two parties could not appeal.
This “suit” that has been fought in the WTO for more than ten years seems to have seen the end.
The aftereffects are still uneven. Is there another wave?
The Office of the U.S. Trade Representative issued a statement on December 30 last year that when the European Union imposed tariffs on about $4 billion of U.S. goods as authorized by the World Trade Organization, it was based on trade data during the period of sharp decline in trade volume affected by the coronavirus epidemic, which led to the tariffs imposed by the European side to cover more American goods.
To this end, the United States is “forced” to adjust and impose tariffs on some goods from France and Germany.
AIRBUS VS BOEING
AIRBUS VS BOEING Sources revealed that the negotiations between the United States and the European Union to settle the dispute have stalled. The European Commission issued a statement the next day
December 31, 2020, believing that this unilateral behavior of the United States hindered the ongoing negotiations on subsidies between Boeing and Airbus.
At the same time, it is hoped that negotiations with the new American government can be advanced as soon as possible to find a better solution.
In response to the new tariff increase announced by the United States, Reuters quoted an Airbus spokesman as saying that the tariff imposed by the United States will impact the production of Airbus A320, which relies on components from France and Germany.
At the same time, some analysts pointed out that Airbus may be less affected in the early stage of tariff increase, because airlines generally purchase fuselage and wings in advance to ensure a smooth production process.
In terms of alcohol tariffs, this is the first time that the United States has imposed tariffs on EU red wines with alcohol levels above 14%.
In October 2019, the United States announced a 25 percent tax on wines with alcohol levels below 14 degrees in France, Spain, Germany and the United Kingdom (the four major countries that have assisted Airbus) in retaliation for EU subsidies to Airbus.
It is worth noting that Spain and Britain’s high-alcoholic wines have not been included in the latest tax list of the U.S. government this time.
The U.S. Trade Representative’s Office said that the tax on red wine from France and Germany was due to the highest level of subsidies for air passengers in the two countries.
The Federation of French Wine Exporters said that the move of the United States gave it a “hammer”. The president of the well-known German winemaking association also said that it would cause great harm to local wine farmers in Germany.
In order to compensate for the retaliatory tariffs imposed by the United States on French wine, the French Ministry of Finance plans to provide a 20% subsidy for monthly turnover to wine companies that have been hit by the epidemic and the additional tariffs imposed by the United States, up to a maximum subsidy of 200,000 euros
In addition, the French government also hopes that the EU can give some support on this matter. France has written to the European Commission requesting EU cooperation in compensation measures.
The dispute over air trade subsidies that began with Boeing and Airbus has been affected by not only the large category of aviation industry, but also affected the livelihoods of more and more people.
Due to the spread of COVID-19, manufacturing around the world has been hit hard, and representatives of Boeing and Airbus told the Financial Times that they are eager to see the dispute resolved.
But at present, the end of the dispute is still unknown…