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U.S. Rejects EU Claims of WTO Case Compliance as Lawmakers Seek Tariff Changes

Friday, July 31, 2020
Sandler, Travis & Rosenberg Trade Report

Additional U.S. tariffs on billions of dollars’ worth of imports from the European Union appear set to remain in effect after the U.S. rejected an EU claim that it is now in compliance with a World Trade Organization ruling against subsidies provided to aircraft manufacturer Airbus. Those tariffs could be modified within the next few weeks, such as by extending them to more products or increasing the tariff rate, although a number of U.S. lawmakers are seeking specific exclusions.

For more information on the U.S. tariffs, including how to mitigate their effects, please contact Mark Segrist or Mark Tallo or click here to register for ST&R’s Aug. 6 webinar.

The EU announced recently an agreement to modify the terms of the repayable launch aid granted to Airbus for development of the A350 aircraft and said this action brought the EU into “full compliance” with the WTO ruling. As a result, EU Trade Commissioner Phil Hogan insisted that the U.S. lift its “unjustified tariffs” immediately.

However, in a July 29 statement to the WTO Dispute Settlement Body, the U.S. rejected the EU’s claim. “The EU has not provided any details of these supposed amendments to the WTO or

directly to the United States … nor does the EU even address the remaining six WTO-inconsistent launch aid measures,” the statement said. As a result, “no one can take seriously that these changes actually address the full scope of massive, WTO-inconsistent subsidies and bring a resolution to this longstanding dispute.”

The statement indicates that the U.S. will not be removing its tariffs as the EU demanded and suggests that they will remain in place for the foreseeable future. While both sides have called for a negotiated solution at various points in the dispute, the Trump administration has shown little interest in that option and in fact has employed rhetoric that would seem to decrease its chances. For example, the July 29 statement asserted that Brussels has never “made a serious attempt to withdraw these subsidies or remove their pernicious effects” and that no WTO member “making a genuine effort to comply could get it so wrong, so frequently, and for so long.”

In the meantime, the Office of the U.S. Trade Representative is considering whether to modify the list of EU goods subject to additional tariffs by removing or adding items or increasing the tariff level to as much as 100 percent. A decision could come in the next few weeks.

On July 29 dozens of members of Congress wrote to USTR Robert Lighthizer asking that such modifications include removing all tariffs on food and drink products (HTSUS subheadings 0203 through 2208) given that industry’s ongoing economic struggles due to the COVID-19 pandemic. “Additional duties on imported wine, spirits, and food products like fruit, pork, and olive oil cut into their already tight profit margins,” the letter said, “further threatening the survival of these industries and the many jobs they support.”

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