Last Friday the United States Trade Representative (USTR) ramped up its tariffs on European aircraft, increasing the duty from 10% to 15%, effective March 18.

It also announced it would make minor modifications to 25% tariffs imposed on cheese, wine, Irish and Scotch whisky, and other non-aircraft products from the EU, namely adding a 25% tax on French and German butcher and kitchen knives and dropping prune juice from the list of taxed items. While the move is hard-hitting, particularly for European aircraft, EU officials had feared more drastic measures in an increasingly fraught trade relationship with the U.S.

Background

The tariffs are part of a 15-year-old complaint over European aircraft subsidies to plane maker Airbus, putting Boeing, its U.S. competitor, at a disadvantage. Last October, the World Trade Organization authorized the U.S. to impose tariffs of up to 100% on 7.5 billion dollars’ worth of EU exports annually to recoup its losses. The imposed duties are lower than those permitted under WTO’s ruling, however, USTR decided against additional escalation after a mid-December public consultation recorded protestations from more than 26,000 U.S. consumers and industries. While USTR’s latest action on tariffs thus could have been significantly more painful, businesses hoping for a relief remain disappointed with the levies, which are expected to continue until the U.S. and EU come to a negotiated resolution. As the two sides cannot agree on terms for starting talks, this remains an uncertainty at least in the short-term.

Potential for Escalation

Further escalation by Washington also is anticipated if Brussels hits U.S. imports with tariffs over unfair subsidies to Boeing. The WTO is expected to rule this spring on damages caused by U.S. plane maker’s state tax breaks, which would authorize the EU to target U.S. goods with retaliatory tariffs. A preliminary list of U.S. goods proposed as targets for EU retaliatory tariffs was drawn up last year, focusing primarily on U.S. farm products. Although Brussels no doubt is mulling over a right response to the most recent U.S. tariff hikes on aircraft, the broader picture for the EU remains to reset its trade relations with the U.S.

Impact on EU-US Trade Agreement

At the beginning of the year, European Commission President Ursula von der Leyen announced that she is seeking a mini trade deal with the U.S. in the next few weeks covering trade, technology and energy. However, the U.S. insists any deal must include EU agricultural concessions – a sticky and politically explosive topic for the EU. EU officials have conceded agricultural concessions could come in the shape of separate commitments lowering EU non-tariff barriers for certain U.S. farm goods. It has been suggested this could include the approval of more genetically modified crops for sale in the bloc, which is of obvious interest to the U.S.
Continue Reading U.S. increases tariffs on European aircraft: EU response a litmus test for transatlantic trade relations

The holiday season is nearly upon us, yet things in the trade world are not so jolly.  The United Kingdom (UK) eked out a slight gain in the third quarter to avoid a recession.  In the fourth quarter, the usual High Street hustle and bustle is expected to be dampened somewhat as Brexit uncertainty continues

On November 1, 2019, the World Trade Organization (WTO) authorized China to suspend $3.579 billion in trade concessions to the United States, roughly half the $7 billion amount China had requested. The Arbitrator’s Decision stems from a complaint originally lodged by China in 2013 regarding the use of certain methodologies in antidumping investigations on Chinese

On October 31, 2019, the World Trade Organization (WTO) ruled in favor of the United States in determining that Government of India provides prohibited export subsidies to Indian producers and exporters.  The WTO dispute panel determined that the: Merchandise Exports from India Scheme (MEIS); Export Oriented Units Scheme (EOU) and related sector-specific schemes; Special Economic

Late last week, China filed a request with the World Trade Organization (WTO) Dispute Settlement Body (DSB) for authorization to “suspend concessions and related obligations” in the amount of $2.4 billion as recourse for the United States’ alleged failure to comply with a 2015 dispute settlement report.  The disagreement stems from a dispute filed by China in May 2012 challenging certain aspects of 17 countervailing duty investigations by the United States, on a wide range of products, as conducted by the Department of Commerce (DS437).  The decision reached by a WTO panel, as modified by the WTO Appellate Body and adopted by the DSB in January 2015, included a number of findings in favor of and against the United States.  In particular, the WTO Appellate Body found that Commerce’s “rebuttable presumption” that Chinese state-owned enterprises are public bodies, and that Commerce’s rejection of Chinese private transaction prices as distorting the benchmark for the “provisions of goods or services for less than adequate remuneration” benefit analysis, were inconsistent with WTO rules.

In May 2016, China returned to the WTO to request consultations with the United States under Article 21.5 of the Dispute Settlement Understanding (DSU), which establishes procedures for when parties disagree about whether the losing party has implemented the DSB’s recommendations and rulings.  Failed consultations led to the establishment of a compliance panel, which issued a decision in March 2018.  Both China and the United States appealed to the WTO Appellate Body.  In July 2019, the Appellate Body upheld the compliance panel’s
Continue Reading China Requests $2.4 Billion in Relief After WTO Ruling Against United States

At the WTO General Council’s meeting this week in Geneva, the debate over developing country rights at the WTO came to a head.  The United States has recently been especially outspoken in its criticism of developing country status for WTO members, which entitles the declared developing country to certain exemptions, longer timetables for implementation of commitments, and other flexibilities under WTO agreements to assist with integration into the world trading system – generally known as “special and differential treatment.”  Special and differential treatment provisions are found in virtually all WTO agreements, ranging from commitments to increase trade opportunities for developing country members, to requirements to protect developing country interests, to rules allowing for flexible implementation, transitional time periods, and technical assistance.  For example, developing countries may extend for two additional years their own safeguard actions to restrict imports causing injury to their domestic industries, and are generally exempt from the application of other members’ safeguard actions.  Since the WTO’s creation in 1995, however, the WTO has not specified any criteria or process for determining developing country status, allowing members to self-declare their status without meeting any analytical requirements.

According to the United States, this lack of discipline has led to unpredictable and illogical results, with some of the world’s wealthiest and fastest developing (in terms of economic, social, and other indicators) – and often most trade-distorting – countries putting themselves as the same category as the WTO’s least-developed members in order to strategically or uniformly avoid additional commitments.  Some of the examples cited by the United States of those WTO members seen to be unreasonably declaring themselves as developing include China, India, Singapore, Israel, Mexico, Turkey, Chile, Indonesia, South Africa, South Korea, the United Arab Emirates, and Qatar.  As the United States explained in a WTO communication issued in February 2019:

Simply put, self-declaration has severely damaged the negotiating arm of the WTO by making differentiation among Members near impossible.  By demanding the same flexibilities as much smaller, poorer Members, export powerhouses and other relatively advanced Members . . . create asymmetries that ensure that ambition levels in WTO negotiations remain far too weak to sustain viable outcomes.  Members cannot find mutually agreeable trade-offs or build coalitions when significant players use self-declared development status to avoid making meaningful offers.  Self-declaration also dilutes the benefit that the {least-developed countries} and other Members with specific needs tailored to the relevant discipline could enjoy if they were the only ones with the flexibility.

The United States’ February communication also proposed that the General Council adopt a new approach that would preclude special and differential treatment “in current and future WTO negotiations” for countries that fall into at least one of four categories: members of the Organization for Economic Cooperation and Development (OECD); one of the G20 countries; classified as “high income” by the World Bank; or account for “no less than 0.5 per cent of global merchandise trade (imports and exports).” 
Continue Reading Developing Country Status Up for Debate at WTO

On October 2, 2019, the World Trade Organization (“WTO”) awarded the U.S. the largest arbitration award in the WTO’s history, $7.5 billion annually, in retaliation for the unlawful EU subsidization of Airbus.  The award comes after nearly 15 years of litigation at the WTO where the U.S. successfully argued that the EU and four of its member states conferred more than $18 billion to Airbus in subsidized financing.

As retaliation, the U.S. will impose an additional 10 percent duty on airplanes from France, Germany, Spain, and the United Kingdom, as well as an additional 25 percent duty on certain goods including single malt Irish and Scotch whiskies, coffee from Germany, cheeses from several countries, and certain garments from the United Kingdom.   The retaliatory tariffs will likely take effect on October 18, 2019 and will be “continually re-evaluate{d}. . . based on {U.S.} discussions with the EU.”  In selecting the goods that will be affected by the retaliatory tariffs, the Office of the U.S. Trade Representative explained that the tariffs are intended to most heavily impact imports from France, Germany, Spain, and the United Kingdom, the Member States that provided Airbus with the disputed subsidies.

Meanwhile, tariff threats also loom over the U.S. in a parallel WTO case regarding the illegal subsidization of Boeing in the U.S.  The global trade regulator is expected within six-to-eight months to authorize the EU to impose its own retaliatory tariffs on U.S. goods. In April, the EU published a preliminary list of U.S. products to be considered for countermeasures. Ahead of the WTO’s ruling on its case regarding the subsidization of Boeing, the EU might choose to revoke prior settlements with the U.S. in other WTO cases, which would effectively create tariffs on approximately $4 billion worth of U.S. imports into the EU.
Continue Reading A Tale of Two Aircraft: U.S. Wins Historic Award in Airbus Case While EU Awaits Ruling on Boeing

Last April, the United States Trade Representative (“USTR”) initiated an investigation to enforce U.S. rights stemming from a World Trade Organization (“WTO”) ruling concerning the European Union’s (“EU”) provision of illegal subsidies on the manufacture of large civil aircraft.

In the notice initiating that investigation, USTR proposed imposing additional ad valorem duties of up to