The EU is set to hold back from immediately imposing punitive tariffs on US products in the two sides’ dispute over subsidies for Boeing and Airbus, with diplomats saying the bloc is unlikely to act before the US presidential election.
The World Trade Organization on Monday confirmed the EU’s right to hit almost $4bn of US goods with punitive tariffs in retaliation for illegal state aid to Boeing — validating a dispute-settlement award the WTO announced earlier this month.
But Valdis Dombrovskis, the EU’s new trade commissioner, said in a statement that the bloc would prioritise settlement talks with Washington over rushing to put punitive tariffs in place.
“In the absence of a negotiated outcome, the EU will be ready to take action in line with the WTO ruling,” he said. “As I have made clear all along, our preferred outcome is a negotiated settlement with the US.”
The European Commission has prepared a retaliation list covering a wide range of US products including aircraft, tractors and diggers, gym equipment, casino tables and groundnuts, as well as grapefruit juice and orange juice. One EU diplomat said there was “no way” that the additional duties would be applied before the US election on November 3, noting that the bloc had not yet started its formal internal procedures to introduce them.
Another noted that there had been a debate within the commission over how to proceed and that in practice little time remained to put measures in place before the election.
The row over aircraft subsidies dates back to 2004, when the US launched a case claiming that $22bn in illegal funding had been given to Airbus. The EU launched a counter challenge, claiming $23bn in illegal aid was offered to Boeing.
Although the retaliation rights of $3.99bn are far less than those awarded to the US last year in its parallel case against Airbus, Brussels still views the award as game-changing for the 16-year old dispute over aircraft subsidies, and for transatlantic trade relations more broadly.
Mr Dombrovskis told the Financial Times earlier this month that he hoped the award would help bring the US to the negotiating table, and that an understanding on aircraft subsidies could be the first step of a programme of co-operation to save the multilateral trading system.
The European Commission said on Monday that it would be “ready to use its retaliation rights in case there is no prospect of bringing the dispute to a mutually beneficial solution in a near future”.
National ambassadors to the EU are scheduled to discuss the matter on Wednesday.
Mr Dombrovskis also told the FT earlier in the month that the US would need to swiftly withdraw its own punitive tariffs against EU products to avoid the EU going ahead with countermeasures. Washington has hit goods ranging from French wine and sweaters to German machine tools over the aircraft dispute.
“I think the commission now realised they need to moderate the pace a bit,” said one EU diplomat.
Mr Dombrovskis said in his statement on Monday that Brussels would “continue to engage intensively with our American counterparts”, including US trade representative Robert Lighthizer.