Europe Can Impose Tariffs on U.S. in Long-Running Aircraft Battle

WASHINGTON — The World Trade Organization gave the European Union permission Tuesday to impose tariffs on $4 billion worth of American products annually in retaliation for illegal subsidies given to American plane maker Boeing, a move that could result in levies on American airplanes, agricultural products and other goods.

The decision, which stems from a 16-year fight before the global trade body, follows a parallel case that the United States brought against Europe over subsidies to its largest plane maker, Airbus. Last year, the Trump administration imposed tariffs on European planes, wine, cheese and other products after the W.T.O. gave the United States permission to retaliate on up to $7.5 billion of European exports annually.

It remains to be seen whether the new tariffs will ultimately persuade the United States and Europe to come to a negotiated settlement that would lift the levies, or inflame relations and result in higher costs on businesses and consumers on both sides of the Atlantic. The European Union has repeatedly appealed to the United States to remove its tariffs, but American officials say Europe has not taken the necessary actions to stop its Airbus subsidies.

The European Commission issued a preliminary list of American products last year that it could choose to tax, including aircraft, chemicals, citrus fruit, frozen fish and ketchup.

The tariffs would come at a difficult moment for American companies, which are reeling from the coronavirus pandemic and would be especially painful for Boeing, which is already struggling from a pair of devastating crises. Boeing, like Airbus, announced plans this summer to cut more than 10 percent of its global work force amid a steep decline in travel, which has forced airlines to delay and scale back plans to buy planes. Both Boeing and Airbus plan to cut more than 30,000 jobs in all.

Delta Air Lines, whose fleet includes hundreds of planes from both manufacturers, said on Tuesday that it had scaled back plans to buy $5 billion worth of aircraft through 2022. Just under a million people were screened at federal airport checkpoints on Monday, a more than 60 percent decline from the same day last year.

Boeing is also still struggling with fallout from the 737 Max, a star of the company’s fleet of planes, which has been grounded worldwide since March 2019 after two crashes killed 346 people. In January, the company estimated that the grounding, which could be lifted in the coming months, would cost it more than $18 billion. The company is also contending with quality concerns related to another plane, the 787 Dreamliner, a wide-body jet designed for long-distance flights.

The W.T.O.’s decision on Tuesday rested largely on a Washington state tax break worth about $100 million a year. To neutralize the threat of sanctions, lawmakers there repealed the tax break earlier this year. But Airbus contends that Boeing continues to receive other preferential tax treatment from the state.

“We are disappointed that Airbus and the E.U. continue to seek to impose tariffs on U.S. companies and their workers based on a tax provision that has been fully and verifiably repealed,” Boeing said in a statement. “Boeing supported repeal of the Washington state tax provision because complying with W.T.O. rulings is the right thing to do, even though it was costly and came at a difficult time for our company and the industry.”

Boeing also called on Airbus and the E.U. to set tariffs aside and focus “on good-faith efforts to resolve this long-running dispute.”

The ruling brings to a close a dispute that formally began in 2004. At the time, the United States and Boeing accused several European nations of violating trade agreements by providing Airbus with below-market loans. That “launch aid” helped Airbus to develop and produce several types of aircraft, allowing it to gain equal footing with Boeing in the global airplane market, despite having less than 25 percent of the market in 1990, they argued. Last year, the W.T.O. sided with the United States, allowing up to $7.5 billion in annual tariffs on European imports.

Europe countered with a formal complaint of its own in 2005, arguing that the United States had similarly provided illegal subsidies to Boeing. In a ruling last year, the W.T.O. said that Boeing had indeed benefited from the Washington State tax break.

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