Commercial, Regulatory

U.S. Proposes New Tariffs on European Commercial Helicopters

By Frank Wolfe | April 9, 2019
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The Airbus H160 helicopter flies over New York City in a demonstration last year (Airbus Photo)

The U.S. trade war has a new front: Europe.

While the Trump administration last year proposed tariffs on Chinese goods, including helicopters, it broached new tariffs on European-built commercial helicopters from France, Germany, the United Kingdom, and Spain on April 9.

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The World Trade Organization "has found repeatedly that European Union subsidies to Airbus have caused adverse effects to the United States," the office of the U.S. Trade Representative said on April 9.  "Today, the Office of the United States Trade Representative begins its process under Section 301 of the Trade Act of 1974 to identify products of the E.U to which additional duties may be applied until the EU removes those subsidies."

Robert Lighthizer, the U.S. trade representative, said that the case "has been in litigation for 14 years, and the time has come for action."

Lighthizer, a former deputy U.S. trade representative under President Ronald Reagan, chief of staff for the Senate Finance Committee, and attorney for the marquee firms of Covington & Burling and Skadden, Arps, Slate, Meagher & Flom, has criticized what he calls China's unfair trade practices.

While the World Trade Organization may release an arbitration report on the U.S.-E.U. dispute this summer, USTR said that it estimates "the harm from the E.U. subsidies" to be $11.2 billion per year. Trade experts, however, counter that governments typically subsidize their own aerospace companies and the U.S. is no exception.

“Our ultimate goal is to reach an agreement with the EU to end all WTO-inconsistent subsidies to large civil aircraft," Lighthizer said. "When the E.U. ends these harmful subsidies, the additional U.S. duties imposed in response can be lifted.”

The USTR preliminary list includes a number of products in the civil aviation sector, including Airbus aircraft, and the agency said that it will finalize the list after the WTO arbitrator issues its report on the value of countermeasures.

The USTR cited boosting Boeing sales as the major reason behind the proposed tariffs. "In 2011, the WTO found that the EU provided Airbus $18 billion in subsidized financing from 1968 to 2006," USTR said on April 9.  "In particular, the WTO found that European 'launch aid' subsidies were instrumental in permitting Airbus to launch every model of its large civil aircraft, causing Boeing to lose sales of more than 300 aircraft and market share throughout the world."

Airbus said on Apr. 10 that the company "has taken all necessary measures to comply with the relatively minor elements highlighted by the WTO in May 2018 which, even then, were less than 6 percent out of all Boeing’s claims, regarding alleged Airbus aid."

"By contrast, Boeing has not shown any willingness to comply with the March 28, 2019 WTO decision regarding the massive subsidies received by Boeing that are clearly in contravention of WTO rules,"Airbus said. "The adoption expected this week of the WTO report will allow the EU to start sanctions proceeding with far larger countermeasures against the U.S. This would lead to unnecessary trade tensions, and that shows the only reasonable solution is a negotiated settlement."

Helicopter industry officials are watching to see whether the Trump administration's imposition of tariffs will decrease helicopter sales.

"Given broader trade tensions between the U.S. and European Union, this is concerning," Richard Aboulafia, the vice president of analysis at The Teal Group, said of the proposed U.S. tariffs.  "The Airbus/Boeing WTO battle is several decades old, but the Trump Administration seems determined to make trade a bigger issue.  So far, most of these initiatives have gone nowhere with aircraft and with everything else, but if the administration does move forward on Airbus-related tariffs, helicopters would be a natural place to start."

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