For the past few years, individuals and companies have witnessed the suffering of a global economy due to the US trade war with China, Japan’s trade war with South Korea, worldwide relations tensions, and an economic slowdown.
A decision taken by the WTO (World Trade Organization) worsened the situation by significantly increasing the economic tensions between the United States and the European Union.
On 2nd October 2019, the United States announced they will impose a record 7.5 billion dollars' worth of tariffs on imported goods from the European Union. It is the most significant retaliation measure ever taken in the WTO organization’s history.
The US trade representative’s office (USTRO) already published a list of numerous products which would be affected by those tariffs and announced that they took effect on 18th October 2019. Customs tariffs are set at a 10% rate on products imported by air and 25% on hundreds of agricultural products and other items.
How did the conflict start ?
The trade war between the United States and the European Union is not new. It is the result of a 15-year dispute which started in 2004.
At the time, the United States filed a complaint with the World Trade Organization against the European Union arguing that some European countries had given substantial, illegal financial support to the construction of Airbus airplanes which has hurt rival Boeing’s business, America’s largest aircraft exporter. This complaint was legitimated by a trade agreement signed in 1992.
In 1992, The United States and the European Union signed an agreement stating that subsidies given by the state to companies in the aeronautic sector was prohibited. Seeing that its European rival was gaining more market share in 2003, Boeing had suspicions about an eventual fraud action from Airbus, and decided to withdraw from the agreement in 2004.
For the same reason, years later, Airbus retaliated and also filed a complaint against its rival Boeing.
The WTO, whose task it was to fix worldwide business issues between companies, only gave a mixed verdict in 2010, which led to the discontent of the two parties and years of appeals. Finally in October 2019, the WTO gave its final verdict concerning the complaint against Airbus only and was found ultimately in Airbus’ favour.
Which Countries and goods will be affected ?
The whole of Europe will suffer from those trade tariffs but in different ways and varying degrees of impact depending in the exporting country.
However, the sanctions were originally set up in retaliation to some countries which participated in giving illegal subsidies to Airbus. Those countries will be the most affected, namely France, the United Kingdom, Germany and Spain.
As a result, the 10% tariff on aircraft parts will only affect the aforementioned countries.
In respect to agricultural food products, a 25% tariff will be applied to various key products which drive the most growth and profit of the exporting country.
Key products hit by tariffs include wine, olives and cheese from France; wine, olives, coffee, kitchen utensils and knives from Germany; alcoholic drinks like Whiskey from Scotland; olives, wine, olive oil, cheese and meat from Spain; manufactured clothes from the United Kingdom; parmesan, reggiano, romano, polvone cheese, fruits, clams and yogurts from Italy; and finally, pork sausages and pork products other than ham produced in the European Union.
Can the European Union respond in kind ?
In 2012, The European Union also filed a complaint to the WTO, claiming damages for the illegal aid from the United States to Boeing. The European Union is still waiting for the final verdict which is expected to be revealed this next spring season, in hopes to also impose tariffs on American imported products.
It can clearly be seen that the Airbus and Boeing competition war led to our now current worldwide trade dispute in which both sides of the Atlantic will be affected. It will have significant negative consequences not only on European states, industries and businesses but also on American consumers - individuals and companies not related to Airbus’ non compliance. Moreover, retaliation from the EU might also negatively affect American businesses and industries in the future.
In today’s world of globalization, this issue can be debated: to what extent can competition between companies affect the everyday lives of individuals ?
Amandine. M
Sources:
- The Guardian. Scotch Wiskey and French Wine hit by $7.5bn US tariffs. 02/10/19. Unknown author. [Online] (accessed on 29/10/19). <https://www.theguardian.com/business/2019/oct/02/us-may-impose-75bn-of-tariffs-on-eu-over-airbus-subsidies>
- BBC. US set to impose tariffs on $7.5bn of EU exports in Airbus row. 02/10/19. Unknown author. [Online] (accessed on 29/10/19). <https://www.bbc.com/news/business-49906815>
- Ouest France. Conflit Airbus/Boeing: Pourquoi le ton monte entre les États-Unis et l’Europe ?. 03/10/19. Marion Dubois. [Online] (accessed on 30/10/19).< https://www.ouest-france.fr/economie/conflit-airbus-boeing-pourquoi-le-ton-monte-entre-les-etats-unis-et-l-europe-6548406 >
- The New York Times. How Boeing vs. Airbus became Trump vs. Europe. 06/10/19. David Gelles. [Online] (accessed on 30/10/19). <https://www.nytimes.com/2019/10/06/business/boeing-airbus-world-trade-organization.html>
Hello Amandine,
ReplyDeleteThank you for your article! I heard about this situation but your article helped me to understand more about it. For example: what kind of products are hit by tariffs etc.
I think those tariffs are really severe for European countries. However, I read from an article (Contrepoints :Guerre commerciale avec les USA : c’est l’Europe qui a commencé) that European countries had already strong tariffs on American products and that’s also why the USA tries to fight this unfair trade with Europe by putting tariffs on some imported European products.
You asked this following question “ : To what extent can competition between companies affect the everyday lives of individuals ?”, do you have an opinion about that ?
I have another question; do you think that European countries will continue to export to the USA or will they export more in other countries? Do you think that because of the World’s tensions, protectionism will be back ?
Thank you in advance for your answer.
Nelly