WTO Disputes Heighten Stakes of EU-US Trade Tension

The Office of the U.S. Trade Representative's proposal to tariff up to $11 billion worth of goods from the EU as part of a long-running dispute over aircraft subsidies (see 1904090031) adds some new tension to an already fraught trade relationship. Although the trade dispute resolution that the U.S. is asking for pertains to large commercial airplanes, it goes far beyond aerospace, hitting cheeses and other food, wine, clothing and building materials. “This case has been in litigation for 14 years, and the time has come for action. The Administration is preparing to respond immediately when the WTO issues its finding on the value of U.S. countermeasures,” USTR Robert Lighthizer said in a news release.

At a press briefing April 9, a European Commission spokesman said the figure quoted by the USTR is based on internal estimates, and that the EU is open to discussing both the Airbus dispute and a similar EU challenge at the WTO of Boeing subsidies as long as the U.S. does not impose preconditions on the talks.

Peterson Institute for International Economics Senior Fellow Chad Bown said if $11 billion were to be approved, this would be bigger than any other WTO-sanctioned retaliation in the past. Any level of retaliation is going to make it harder to negotiate a U.S.-EU trade deal, he said at an April 9 event on Section 232 tariffs on autos sponsored by the Motor & Equipment Manufacturers Association. Bown said that while the threat of auto tariffs brought Japan and the EU to the table, he's pessimistic that the EU and the U.S. will make enough progress to forestall the imposition of auto tariffs on European imports.

Bown said that while imposing tariffs on car imports doesn't make sense from an economic perspective, from a political perspective, the threat or even imposition could draw votes to Trump in Ohio and Michigan. Trump is "trying to convince the workers and voters in those states that he's trying to do stuff that benefits them," he said.

Ann Wilson, head of government affairs for MEMA, said equipment manufacturers who import parts that share Harmonized Tariff Schedule codes with cars do not have confidence than an exclusion process will spare them. "Our members have spent hundreds of thousands if not millions" on submitting exclusion requests from steel and aluminum tariffs. These are smaller companies who don't have trade staffs, she said. "They depend on customs brokers."

Meanwhile, Senate Finance Committee Chairman Chuck Grassley, R-Iowa, told reporters on a conference call April 9 that he's glad the announced retaliation follows WTO guidelines. "I'm glad it's not to be based on the president's just willy-nilly putting tariffs on at the drop of a hat." He added, “At this point, it's just a proposed list, it's not final. It could be changed, or it could be not imposed at all, or we could be lucky that Europe's going to give up their subsidies.”