The long running disputes between the United States and European Union concerning subsidies granted to Boeing and Airbus are moving into the trade retaliation stage. If the US and the EU impose countermeasures on one another in the form of tariffs applied strategically to certain traded goods or other measures applied to services, this could create future opportunities for exporters in other countries who supply goods or services to the US and EU markets.
The preliminary lists of products that could face retaliation have been published by the United States and the European Union. The preliminary lists collectively cover “soup to nuts” in the literal sense (i.e., “soups” and “nuts” are on the EU list) and in the figurative sense (i.e., from “beginning to the end” due to the broad range of listed products). Notably, the large civil aircraft that are the subjects of the disputes are not included on the lists. The lists have been published for public comment and consultation and are not final (see notices from the United States and the European Union).
Arbitrators will now rule on the maximum levels of the countermeasures that the US and the EU may apply, and these amounts may be less than the amounts requested. Once the arbitration rulings are issued, the US and the EU will make formal requests to the WTO Dispute Settlement Body for authorization to impose countermeasures in the amounts determined by the arbitrators. Countermeasures could include the application of ad valorem duties on imports of up to 100 percent. The US and the EU will be able to maintain the countermeasures until the subsidies at issue are withdrawn or their adverse effects are removed.
The sheer magnitude and scope of the potential countermeasures makes it worthwhile for producers and exporters in other countries to review the lists to determine whether their products are covered and whether any countermeasures could put their products in a worse or better competitive position in the US and EU markets. Likewise, importers in the US and the EU should review the lists to determine whether their established supply chains could be disrupted, in which case alternative supply sources in other countries may need to be secured. If the balance of competition in the markets for such products are affected by the potential countermeasures, new supply chains will need to be established, and this could mean significant opportunities for exporters in countries other than the US and the EU.
In the meantime, the US and the EU could avoid the disruption that the potential countermeasures would cause to one another’s markets by reaching a negotiated settlement of the disputes.
Tereposky & DeRose regularly provides representation and advice in WTO matters. Should you have any questions regarding this matter, we are at your disposal.