Washington, D.C. – The World Trade Organization (“WTO”) issued an arbitration decision today that leaves the European Union (“EU”) with no lawful basis to impose tariffs on imports from the United States. The EU sought the right to impose countermeasures relating to NASA and Department of Defense research and development (“R&D”) subsidies, but the WTO arbitrator rejected that request. The EU also sought the right to impose countermeasures relating to the Washington State Business & Occupation tax rate reduction. The WTO arbitrator explicitly did not take into consideration Washington State’s repeal of that tax provision on April 1 of this year, limiting its review to the impact during the 2012-15 period, to which it assigned a value of approximately $4 billion per year.
“While we disagree with certain aspects of its valuation, the more important point is that the arbitrator did not authorize any retaliation for subsidies other than the Washington State tax break,” said United States Trade Representative Robert E. Lighthizer. “Because Washington State repealed that tax break earlier this year, the EU has no valid basis to retaliate against any U.S. products. Any imposition of tariffs based on a measure that has been eliminated is plainly contrary to WTO principles and will force a U.S. response.”
Ambassador Lighthizer continued, “The United States is determined to find a resolution to this dispute that addresses the massive subsidies European governments have provided to Airbus and the harm to U.S. aerospace workers and businesses. We are waiting for a response from the EU to a recent U.S. proposal and will intensify our ongoing negotiations with the EU to restore fair competition and a level playing field to this sector.”
Washington State enacted Engrossed Senate Bill 6690, which – effective April 1, 2020 – raised the aerospace B&O tax rates to the generally applicable level, thereby removing the sole illegal measure and bringing the United States into full compliance with WTO rules. Under WTO rules, a WTO Member can apply authorized countermeasures only until the illegal measure, or the harm from that measure, is eliminated, which has already occurred in this dispute.
In the arbitration, the EU sought countermeasures of over $10 billion per year. However, the arbitrator determined that the EU incorrectly identified R&D measures that could not serve as a basis for countermeasures. The arbitrator rejected EU requests based on aeronautics R&D measures that were not found to breach WTO rules in a prior compliance proceeding.
The United States continues to impose tariffs on EU goods because of the EU’s failure to withdraw billions of euros of illegal launch aid subsidies for the Airbus A380 and A350 programs. However, to maximize the chances of success in ongoing negotiations to end this dispute, the United States has exercised restraint by declining to impose on the EU the full amount of authorized countermeasures. Read More→
