The US strikes back

The World Trade Organisation’s ruling that the US was allowed to impose tariffs on $9.7 billion dollars worth of goods has raised eyebrows

Hussain Zaidi

The World Trade Organisation

The American Boeing and Eu-

has ruled that the US is allowed to impose record tariffs on $9.7 billion ropean Airbus are primarily aircraft manufactures; they have a duopoly

of the goods it imports from the EU

on commercial aircraft, resulting in in retaliation to illegal subsidies given an intense rivalry between the two. to Airbus by European governments. Both companies have also been inThis is near twice the previous record volved in a dispute since 2005 when

of $6 billion set in 2002. But why has it reached this decision? the US filed a case arguing that EU loans to Airbus were illegal state sub-

The World Trade Organisation is an intergovernmental organisation that regulates trade between different countries. It was formed in 1995 under the Marrakesh agreement and includes 123 nations. sidies. In 2010, The World Trade Organisation ruled in favour of the US. However, the US then complained that the EU had not complied with the ruling, leading to the continuation of the ‘tit-for-tat’ row. Boeing is also in financial trouble, following their disastrous 737Max, which was involved in two major crashes within a few months. These horrific accidents were caused by Boeing rushing to complete an updated version of the fifty-year-old 737 with new, poorly designed engines to compete with the Airbus A320neo. This scramble to the market was due to a 2011 order from American Airlines for a 737 with new engines before Boeing had even announced that they were going to produce such an aircraft. These accidents have resulted in regulatory authorities, such as the FAA, grounding the 737 until further notice, and cancellations of orders for the 737Max. Because of this, in July 2019 Boeing reported the worst financial losses in its history, losing $3.38 bil-

lion for the previous quarter. These sanctions will help Boeing remain competitive in the crowded aerospace market, where its reputation has been hit. Later in October 2019, the U.S Government placed tariffs on EU goods due to this conflict. The main target of this sanction, Airbus, now

has to pay 10% on aircraft imported from Europe. The consequences of this also include a tax of 25% on German and British industrial and agricultural products and Spanish, Italian, and French food products. French Finance Minister, Bruno Le Maire said: “We are offering the hand of friendship, and I hope the US listens to the voice of reason”, describing his wish for the situation to change. These sanctions come at a time when there are trade tensions strain the global economy. In March 2018, the Trump administration announced 10% tariffs on aluminium and 25% tariffs on steel imported into the US, prompting the EU to impose $2.86 billion worth of duties on American goods such as motorbikes and whiskey. Trump has tweeted “Based on the Tariffs and Trade Barriers long placed on the U.S. & its great companies and workers by the European Union, if these Tariffs and Barriers are not soon broken down and removed, we will be placing a 20% Tariff on all of their cars coming President of the United States, Donald Trump, believes that a trade deal is expected. Trump has tweeted “China and the USA are working on selecting a new site for signing of Phase One of Trade Agreement, Chile was canceled do to unrelated circumstances. The new location will be announced soon. President Xi and once they have been approved by the WTO, impose its own punitive tariffs”. One way this spat could end is with a trade deal, which Angela Merkel’s spokesman, Steffen Seibert also suggested stating, “Our aim is to space industry”. Le Maire has said on the US next year.” However, Trump has tweeted “The WTO is BROKEN when the world’s RICHEST countries claim to be developing

countries to avoid WTO rules and get

special treatment. NO more!!! Today I directed the U.S. Trade Representative to take action so that countries stop CHEATING the system at the expense of the USA!” This spat has

Airbus now has to pay a 10% tax on aircraft imported from Europe. lasted 15 years and may take a long time to be resolved, with either side unlikely to concede. The USA has defended Boeing, whose representatives have reacted with the following statement: “we trust that our example will prompt Airbus and the European Union to immediately bring themselves into full compliance with

about 60% of total deal, after APEC in parties by the WTO”. In addition, the the substantial rulings against these UK government has responded to

President Trump will do signing!” is not in the interests of the UK, EU The EU could exact revenge on or US. We are working closely with the USA next year when the WTO has the US, EU and European partners to to decide if the US was in violation of support a negotiated settlement to subsidy rules when it gave tax breaks the Airbus and Boeing disputes. We to Boeing. It is highly likely they will are also seeking confirmation from rule in favour of the EU. The German the WTO that the UK has complied foreign minister, Heiko Maas, has fully with WTO rulings regarding supalso threatened to retaliate stating port to Airbus, and should not be the EU “will now have to react and, subject to tariffs.” this by replying that “The UK government is clear that resorting to tariffs

Both sides seem to desire a resolution to this dispute, which is harming the economies of both nations. One way this could be done is through a trade deal. The President

achieve an agreement with the US on Organisation broken, displaying seboth of our subsidies in the aero- vere disdain for the WTO and report-

into the U.S. Build them here!” France is “ready to respond firmly The USA is already engaged in with our European partners". He bea trade war with China, with Beijing lieves that "A friendly resolution to planning to place $3.6 billion in levies the Boeing/Airbus dispute is the best on American goods, following clear- solution, and all the more so given ance from the WTO. However, the that Europe could impose sanctions has also labelled the World Trade edly wants to pull the United States out of the World Trade Organisation. In summary, although the WTO has sanctioned the EU, it is highly likely that it will treat the US no differently. Therefore, there is no end in sight for the rift between the EU and the USA.