WTO authorizes Trump to sanction Europe

An Airbus A321 from the American company Delta Airlines takes off from New York airport in August.
An Airbus A321 from the American company Delta Airlines takes off from New York airport in August. BRUCE BENNETT / AFP

A record. Never since its creation in 1995 has the World Trade Organization (WTO) imposed such trade sanctions. The organization in Geneva, Switzerland, authorized Washington on Wednesday (October 2nd) to impose tariffs of $ 7.5 billion (6.9 billion euros) on European imports, in response to illegal subsidies paid by the United Kingdom, France, Germany and Spain to the aircraft manufacturer Airbus. A final decision, which can not be challenged by Brussels.

Customs taxes will be imposed from 18 October: 10% on aircraft imported from the European Union (EU) and 25% on other products, whose list is to be published later in the day by the US Representative's services. Trade (USTR).

This fifteen-year-old conflict is not quite over. The WTO has already condemned Washington for the same reasons, namely the payment of disguised subsidies to the American Boeing, and must fix, in six months, the amount of sanctions that the EU will be allowed to impose.

Calls to negotiate ignored

"Even if we both made mistakes and we can, strictly speaking, impose customs duties on each other, this is not a good solution", had insisted the day before, Tuesday 1st October, the European Commissioner for Trade, Cecilia Malmström. On Wednesday, Bruno Le Maire, the French finance minister, insisted: "An amicable resolution (…) is the best solution, especially as the EU may impose sanctions on the United States next year in a cross dispute. (…) Yes (they) choose to impose sanctions, it would be an economic and political mistake. We will be ready with our European partners to respond firmly. "

Several calls for negotiation from Brussels have been ignored by the Trump administration. This new trade war between the United States and the EU, which adds to the trade tensions between Washington and Beijing, risks weighing on world trade whose growth is slowing down sharply. The WTO is only hoping for a rise in merchandise trade of 1.2% in 2019, compared to 2.6% expected so far.

The amount of sanctions set by the WTO is lower than what the US authorities demanded. At the beginning of the process, Boeing demanded $ 100 billion in trade sanctions, before revising its claims … to $ 11 billion.

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Fear of higher prices for the A320neo

In addition to aircraft produced by Airbus and parts supplied by subcontractors, the USTR plans to tackle olive oil, cheese, swordfish steaks, whiskey, salmon fillets, fruits such as motorcycles, clothing or dairy products. A list that worries everywhere in Europe.

The Italian Minister of Agriculture, Teresa Bellanova, has asked her government to intervene urgently with the United States to prevent a rise in customs tariffs harshly penalize products transalpine.

Airbus fears an increase in its best-selling medium-haul aircraft, the A320neo, at a list price of $ 100 million. With the risk that the latest productions of the European group, which delivers each year a hundred aircraft in the United States, are no longer competitive across the Atlantic. These new taxes should also provoke the wrath of American companies. Delta, JetBlue or American Airlines did not wait for the WTO decision to rebel. "The tariffs on these aircraft will hurt Delta, its employees and customers, and will not affect Airbus because these sales have already been made."said in May the management of Delta. According to our information, taxes should not extend to the entire Airbus range.

Unless the dispute is settled amicably, the commercial sanctions that Brussels may impose in six months may in turn be devastating for Boeing. The American aircraft manufacturer has indeed benefited from tax credits, equivalent to subsidies, for an amount equivalent to $ 18 billion.

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Boeing risks losing European market

This time, Boeing is likely to be shut down in the European market, where it flushes 110 aircraft each year. Worse, the European replica could be long-lasting. According to our information, the aircraft manufacturer in Seattle (Washington State), unlike its European competitor, has not yet waived the tax credits paid by the US states where are installed its factories. He did not even follow up on the attempt to settle amicably the conflict proposed jointly by Airbus and the European Commission.

These taxes apply every year until the WTO finds that the offender has complied with its regulations. For its part, Airbus has, according to several sources, proved that it has given up a large part of the subsidies denounced by its American competitor. Only 6% of the European aircraft manufacturer's production, mainly the long-haul A350 and A380, would still benefit. And again, the A380 is no longer in question since Airbus has announced the stop production of its superjumbo-jet. Similarly, aircraft manufactured at its US facility in Mobile, Alabama, are expected to slip through the cracks.


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