Brussels calls on US to drop tariffs in Airbus-Boeing dispute

Brussels calls on US to drop tariffs in Airbus-Boeing dispute

The EU’s new trade chief has told the US to withdraw punitive tariffs on more than $7bn of EU products or prepare to face additional duties on exports to Europe, as he urged a settlement to the two sides’ 15-year dispute over Airbus and Boeing. 

Valdis Dombrovskis, who was formally appointed on Wednesday as the EU’s trade commissioner, told the Financial Times that repairing the transatlantic relationship would be a top priority, and that the US should withdraw its Airbus-related tariffs as a confidence-building measure.

The US last year imposed additional duties on $7.5bn of EU products, ranging from French wines to Italian cheeses and German machine tools, after being handed the right to do so by the World Trade Organization. The tariffs responded to what the WTO confirmed were illegal subsidies to European aircraft manufacturer Airbus. 

Brussels has waited with growing impatience for a final WTO decision on its right to hit US products in its parallel complaint against state aid for Boeing. The decision is set to come on October 15, with EU officials expecting the bloc to be awarded retaliation rights on about $4bn of US goods. 

While this is less than the volume awarded to the US, EU officials believe that it will still be enough to pack an economic punch. 

Brussels has shortlisted an eclectic mix of US products for punitive tariffs including aircraft, diggers, casino tables and fitness machines, as well as sensitive agricultural goods such as blueberries — grown in the US electoral swing state of Florida.

It’s clear: if we are not seeing clear movement from the US side on withdrawing or at least suspending their tariffs, this will not require much delay from our side

Should the US tariffs be withdrawn or suspended, Mr Dombrovskis said the EU would then stay its hand and the two parties could concentrate on reaching a long-term agreement on aircraft subsidies.

“Of course, if the US is not withdrawing their tariffs we have no choice but to then introduce our tariffs,” he said. “In any case, it’s clear: if we are not seeing clear movement from the US side on withdrawing or at least suspending their tariffs, this will not require much delay from our side.”

Brussels has identified resolving the Airbus-Boeing dispute as key to unlocking a more productive conversation with the US on trade. Aside from this dispute, President Donald Trump has placed additional tariffs on EU steel, and repeatedly threatened to target the car sector. 

Mr Dombrovksis has taken over that effort midstream after his predecessor, Ireland’s Phil Hogan, resigned in August over alleged violations of Covid-lockdown rules. A former Latvian prime minister who steered his country through an international bailout, Mr Dombrovskis is one of the EU commission’s executive vice-presidents, with wide-ranging responsibilities over economic policy. 

One of Mr Hogan’s last acts in office was to seal the first tariff-reduction deal between the EU and US in 20 years, notably including the elimination of duties on US lobster. 

Mr Dombrovskis praised the agreement, but he said that little scope was left for such “mini-deals” on tariffs given the two sides’ different negotiating objectives. European nations have authorised the commission to negotiate a deal with the US on free trade in industrial goods, while the US Congress has been clear that any deal would need to include agriculture — a red line for many EU member states. 

“I would not be expecting new mini-deals like the lobster deal, for the reason that our negotiating mandates are not matching,” Mr Dombrovskis said. “Our mandate clearly excludes agriculture and the US clearly wants to discuss agriculture.”

But he said possibilities were broad for co-operation beyond the Airbus-Boeing case, citing ongoing negotiations on how to smooth product conformity checks. Brussels has also pitched the idea to Washington of having an “EU-US Trade and Technology Council” to discuss standards for emerging technologies such as artificial intelligence. 

Mr Dombrovskis said he wanted to press ahead with co-operation to resolve “purely legal or administrative issues” holding up trade in some EU and US agricultural products such as European beef — while stressing that this would not involve lowering food-safety standards.

“We have lately had a constructive co-operation on shellfish — both sides are now in the process of finalising the last steps before mutual trade can restart”, he said. “I hope we can intensify our co-operation on other similar issues.” 

A central goal of Mr Dombrovskis’s mandate, which runs to late 2024, will be to forge close transatlantic co-operation on reforming and ultimately saving the WTO.

“This turn to unilateralism and this more protectionist approach was clearly something which came with the Trump administration,” he said, while refusing to speculate on what a Biden presidency might bring.

“But in any case we will be engaging . . . and trying to bring the US administration back within the framework of multilateralism.”