EU Pledges Restraint as U.S. Moves to Add Tariffs

Date : 04/10/2019 @ 05:54
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EU Pledges Restraint as U.S. Moves to Add Tariffs

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By Emre Peker 

BRUSSELS -- The European Union signaled it wouldn't immediately retaliate against new U.S. tariffs, seeking to avoid a broader trade war as Washington moves to punish the bloc over Airbus SE subsidies the World Trade Organization ruled illegal.

U.S. Trade Representative Robert Lighthizer on Wednesday said Washington would impose levies starting Oct. 18 on $7.5 billion of European goods -- including commercial jetliners, Irish and Scotch whiskies, cheeses and hand tools -- tapping the WTO's biggest-ever arbitration award.

"We regret that the U.S. appears to have taken the decision to impose additional tariffs," Daniel Rosario, a trade spokesman for the European Commission, said on Thursday. A negotiated solution, he added, "still is, our preferred approach to this problem."

The U.S. made a strategic decision to swiftly apply tariffs: A WTO award ruling next year will enable EU countermeasures over illegal subsidies the WTO found were made to Airbus rival Boeing Co. After unveiling tariffs that will squeeze Airbus and sensitive European industries led by agriculture, U.S. officials said they are ready for talks.

President Trump, who has repeatedly claimed the EU has taken advantage of the U.S., is also poised to decide by Nov. 13 on whether to impose duties on imports of European cars and auto parts.

"A nice victory!" Mr. Trump tweeted on Thursday, hailing the WTO award in the long-running aircraft fight.

In August, the president once again raised the issue of car tariffs, saying Europeans "started to get a little bit worried."

A White House decision to tax auto imports would unleash a tit-for-tat escalation covering nearly 10% of $1 trillion in annual U.S.-EU trade in goods and services. The EU is eager to make a deal in a bid to contain the fallout from the trans-Atlantic aircraft battle, along with revamping trade relations to avoid a bruising economic fight.

"I'm not convinced the U.S. is seeking an immediate settlement" on the WTO case, said Sam Lowe, a trade expert at the Centre for European Reform, a think tank. "This dispute, despite being legal, will spill over into the politics of the trade war."

European officials signaled their inclination to temporarily accept U.S. duties of 10% on commercial jetliners and 25% on agricultural and other goods. Previously, the European Commission -- the EU's executive and trade authority -- had suggested revoking old WTO settlements to rapidly retaliate against $4 billion of U.S. exports.

For a lot of EU governments, dealing with the short-term pain of U.S. levies over the Airbus case is preferable to provoking Mr. Trump into triggering auto duties, an EU official said.

"It's very quiet on car tariffs, that's very good news," an EU diplomat said Thursday. "The appetite of the U.S. to take those tariff decisions has diminished."

Coping with fresh U.S. duties over Airbus, however, will be hard to swallow for exporters caught in the crossfire of the 15-year trans-Atlantic battle over aircraft subsidies.

Washington strategically crafted its list to hit exporters across the EU, and particularly in the four countries that make up the Airbus consortium -- Britain, France, Germany and Spain.

Of the U.K. products targeted by the U.S., single-malt Scotch whisky makes up more than half of the total value -- more than $460 million, according to the Scotch Whisky Association, a trade organization.

"The U.S. is our largest and most valuable single market," SWA Chief Executive Karen Betts said, citing some $1.25 billion in annual exports. "It will undoubtedly damage the Scotch whisky sector."

Last year, EU governments rallied behind a Brussels plan to swiftly hit back at U.S. steel and aluminum tariffs, but now, EU businesses from countries outside the Airbus consortium are crying foul.

"We are dispirited by the tariffs because they are unjustly hitting Italy, which has nothing to do with the Airbus consortium and finds itself paying a truly absurd price," said Nicola Bertinelli, president of the Parmigiano Reggiano Cheese Consortium.

The latest tariffs will nearly triple U.S. levies on the cheese to $2.70 per pound, pushing the retail price in the U.S. to more than $20 a pound the full tariff is passed on to consumers.

Exporters are also mobilizing to counter the effect of U.S. tariffs across the bloc. French wine producers will ask Paris to cover the damages they will incur on more than $1 billion of annual exports to the U.S., said Antoine Leccia, president of the Federation of French Wines and Spirits Exporters.

Despite the EU's current restraint, the threat of escalation persists. European officials warned the EU would hit back if U.S. duties are still in place when the bloc receives its WTO award in the Boeing case.

"I appeal to the United States' sense of responsibility, so that we can find the path to a mutual agreement," French Finance and Economy Minister Bruno Le Maire said on Thursday. Barring a settlement, he said, "the European Union will be ready to react."

--Saabira Chaudhuri in London, Eric Sylvers in Milan, and Matthew Dalton and Noemie Bisserbe in Paris contributed to this article.

Write to Emre Peker at emre.peker@wsj.com

 

(END) Dow Jones Newswires

October 03, 2019 15:39 ET (19:39 GMT)

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