Tariffs on European Food Could Expand Under New U.S. Proposal

Date: Thursday, June 25, 2020
Source: The Wall Street Journal

Coffee, olives, chocolate and vodka among items that could be targeted in long-running dispute over Airbus subsidies, Trump administration says

The Trump administration is considering expanding and raising tariffs on $7.5 billion of imports from the European Union and U.K. that it first imposed last year, part of a long-running dispute at the World Trade Organization that faults European countries for subsidies to aircraft manufacturer Airbus SE.

The Office of the U.S. Trade Representative filed paperwork late Tuesday that would allow companies to comment on a proposed increase to as high as 100% on all goods already tariffed and broaden the list to tariffs on new items such as certain coffees and olives.

The comment period ends July 26, after which the U.S. could act. The action would be about the time that the EU and U.K. are expected to win a parallel case at the WTO that would fault the U.S. for its subsidies of Boeing Co. The WTO case would allow the European countries to respond with tariffs of their own.

The WTO rulings are intended to create an incentive for a negotiated settlement of subsidies over the large aircraft manufacturers, but could lead to a new round of tariff escalation instead.

The U.K. was part of the EU when the case began and when the ruling last year authorized U.S. tariffs, and remains involved in the dispute after leaving the trade bloc.

The U.S. previously identified more than $20 billion of European imports that it could hit with duties as part of the dispute. The items have largely been culturally significant foodstuffs, a move designed to hit European pride.

In Tuesday’s filing, the U.S. identified an additional $3.1 billion of goods that it could tariff, including olives, chocolates, coffee, vodka, gin, beer and potatoes.

A European Union spokesman said in a statement that the U.S. move “creates uncertainty for companies and inflicts unnecessary economic damage on both sides of the Atlantic,” and said that by adding new items to the list the EU was “concerned that this might even go beyond what is authorized under the WTO.”

The USTR’s actions so far have been in accordance with the WTO’s ruling. In October, the U.S. won a WTO case that had stretched nearly a decade and a half. In the ruling, the WTO allowed the USTR to impose tariffs as high as 100% of goods of its choosing.

The WTO, however, only allowed the USTR to hit $7.5 billion worth of goods, a range that the USTR has stuck to. The USTR reserves the option to switch the goods receiving tariffs.

Despite having the WTO’s blessing for duties as high as 100%, and previously filing paperwork on multiple occasions for 100% tariffs, the U.S. has limited tariffs in the dispute to 25%.

While the U.S. has struck trade deals with Canada, Mexico, China and Japan, a similar pact with the European Union has remained elusive, a source of frustration for the White House’s trade team.

In a congressional hearing last week, U.S. Trade Representative Robert Lighthizer said negotiations with Europe were “not looking good in the short run” and that President Trump “will use tariffs if he has to to get a fair shake for American businesses.”

While many members of Congress have supported using tariffs to confront China, which is viewed as a strategic and economic rival, a similar confrontation with the European Union has never enjoyed the same political support.

Although the U.S. has hit Europe with some tariffs, it has repeatedly stopped short of using the full force of tariffs against the bloc, such as refraining from imposing tariffs at 100% during this Airbus dispute or by threatening, but never following through with, proposed tariffs on automobile imports, which would heavily hit the European car makers.

The items currently assessed 25% tariffs already include a wide range of foodstuffs, such as wine, whiskey, cheese and pasta. The tariffs are paid by U.S. importers of these items, raising prices for wholesalers and, ultimately, consumers.

Restaurants, wine importers and wine distributors have fiercely opposed the tariffs, saying they don’t deserve to be targeted in a dispute over aircraft manufacturers. In February, when the USTR last formally reviewed the tariffs, such companies filed around 26,000 comments overwhelmingly opposed to the tariffs.

The Distilled Spirits Council of the U.S., which represents the liquor industry, condemned the move Wednesday, saying: “The longer these disputes go unresolved, the greater the threat of even more tariffs on our industry.”

That February review of the tariffs also mentioned the ability to raise tariffs as high as 100%, but the USTR didn’t take that step. Despite being at the heart of the dispute and also being eligible for 100% tariffs, the U.S. imposed only a 10% tariff on airplanes following the initial ruling. That tariff was raised to 15% in February during the previous review.

 

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