EU flank opens in US trade battles

Transatlantic row looms larger with tit-for-tat tariffs in the frame

Even as Chinese and United States officials prepare to meet in Washington on Thursday in a new round of talks to defuse their trade war, a new flank is opening up for the US in the form of a growing transatlantic trade tussle.

Officials from the European Union and its member states have been struggling to find ways to avoid a tit-for-tat tariff war with the US after the World Trade Organization on Oct 2 ruled in favor of the US in a 15-year case over subsidies granted from EU governments to Airbus. But they also vowed to retaliate if the US goes ahead with the countermeasures allowed by the WTO.

On Monday, the EU ambassador to the US, Stavros Lambrinidis, stressed that the EU and the US are each other's "absolutely best and indispensable economic allies".

"The worst thing we can do is to have fights and spats on issues that make absolutely no sense," he said in a talk at the Carnegie Endowment for International Peace.

US Trade Representative Robert Lighthizer announced after the WTO ruling that the US will begin applying tariffs on certain EU goods from Oct 18. The ruling awarded Washington with compensation worth $7.5 billion a year by slapping tariffs on EU products, with the bulk of the tariffs being applied to imports from France, Germany, Spain and Britain. These four were held to be mainly responsible for the illegal subsidies.

The US trade office claims that it has the authority to apply a 100 percent tariff on affected products, but this time the tariff increases will be limited to 10 percent on large civil aircraft and 25 percent on agricultural and other products. The list includes everything from wine, cheese and olive oil to fruit and sausages.

After the ruling, outgoing European Commissioner for Trade Cecilia Malmstrom noted that in a parallel Boeing case that the EU will, within months, be granted equal rights to impose countermeasures against the US. The EU has also published a list of US products to be subjected to countermeasures. "The mutual imposition of countermeasures, however, would only inflict damage on businesses and citizens on both sides of the Atlantic, and harm global trade and the broader aviation industry at a sensitive time," she said.

"If the US decides to impose WTO-authorized countermeasures, it will be pushing the EU into a situation where we will have no other option than do the same."

French Finance Minister Bruno Le Maire vowed on Oct 3 that France and the EU will respond with sanctions if the US rejects talks over the Airbus trade dispute.

It was reported that the EU made a proposal in July to call for a truce in which both sides would admit fault and figure out ways to curtail airline subsidies, but it has not yet received a positive US response.

Luis Planas, Spain's acting minister of agriculture, fisheries and food, on Friday expressed hope that there is still room for negotiation before Oct 18. Spain summoned US Ambassador Richard Duke Buchan that day to express its "frontal rejection" of the tariffs.

Gary Hufbauer, a nonresident senior fellow at the Peterson Institute for International Economics, said the tactics of US President Donald Trump are to persuade the EU not to retaliate immediately but instead to wait until 2020 when the WTO arbitrator authorizes EU countermeasures against the US in the Airbus complaint against Boeing.

Pierre Vimont, a senior fellow at Carnegie Europe and a former French and EU official, said that while the EU and the US are each other's main trade partners, their differences in the structure of trade systems, such as in consumer protection and public procurement, are very different. "That explains why we're never able to overcome these difficulties," he said on Monday.

"What we can avoid is open confrontation as witnessed to some extent nowadays. Of course, that doesn't help."