Leeham News and Analysis
There's more to real news than a news release.
Leeham News and Analysis
- Boeing defends 787, 777 against whistleblower charges April 17, 2024
- Dissecting Boeing CEO’s statement next new airplane will cost $50bn April 15, 2024
- Bjorn’s Corner: New engine development. Part 3. Propulsive efficiency April 12, 2024
- A350-1000 or 777-9? Part 2 April 11, 2024
- Pontifications: Boeing “transparency”–not so much. April 9, 2024
Tariffs won’t be assessed in WTO Airbus, Boeing cases
The decision is in on the appeal of the WTO panel decision in the Airbus and pending on the WTO’s panel findings on Boeing.
The “what’s next” is dispute resolution and, failing this, the prospect of imposing tariffs on Airbus and Boeing airplanes.
This won’t happen. Why? It’s simple: too much is at stake. Neither company wants a trade war.
In raw numbers, Airbus has a backlog of 740 sales to US airlines and lessors at April 30:
- 51 A319s;
- 457 A320s;
- 83 A321s;
- 69 A330Ps/Fs; and
- 80 A350s.
Boeing has a backlog of 631 aircraft to European airlines and lessors, also at April 30:
- 449 737s;
- 38 747-8Fs/Is;
- 3 767s;
- 23 777s; and
- 118 787s.
We have not broken down Boeing sales to just the “Airbus” countries of France, Germany, Spain and the UK, and we couldn’t get an immediate answer whether the European Union might impose tariffs of just the Airbus countries or all of the EU (and the Boeing figures are for all Europe, not just the EU countries), so the numbers are a little apples-and-oranges. But the underlying point is made: it would be too costly for Airbus or Boeing to insist, through their respective governments, that tariffs be imposed.
As we’ve noted many times, any potential tariffs would most likely be imposed on unrelated industries, an option that we consider to be entirely ridiculous and counter-productive.
We’ve also previously noted that in the WTO case concerning Bombardier and Embraer, the WTO found both home countries violated WTO rules and ultimately authorized sanctions-but neither Canada nor Brazil imposed any tariffs on any industry.
This, of course, brings us right back to our long-standing view that the WTO, powerless to enforce its own findings and rulings, is a complete waste of everybody’s time.
I don’t believe the US is allowed to take countervailing measures against the EU because the subsidies are neither “forbidden” nor “actionable” and cause “injury”. They cause “serious prejudice”, but this kind of actionable subsidy must not be the basis of countervailing measures.
See WTO definitions here.
The WTO found no new “forbidden” or “injurious” subsidies in the case against Boeing. But it allowed findings of previous forbidden export subsidies to stand from a previous judgement against Boeing. It’s not clear if Boeing is making active use of these forbidden subsidies, and of course the appeal may come to a different view.
Under currentm law, if the U.S can show significant price disparities as a function of ‘ costs” for production/ and sales of almost anything- a countervailing duties case could be filed by the workers harmed. And a suitable tariff/duties amount could be imposed. This is separate from WTO issues, and does not have to be filed by companies but can be filed by any group harmed.
For example
Countervailing Duties What Are They?
In today’s global marketplace, the lack of a level playing field can make it difficult for American businesses to compete. Unfair foreign pricing and government subsidies distort the free flow of goods and adversely affect American business. Import Administration, within the International Trade Administration of the Department of Commerce, enforces laws and international agreements to protect U.S. businesses from unfair competition within the U.S. resulting from unfair pricing by foreign companies and trade distorting subsidies to foreign companies by their governments.
This article provides a brief overview of how Import Administration provides a way for firms to seek relief from unfairly traded imports by filing a petition seeking the imposition of countervailing duties on imports of the unfairly traded merchandise. Countervailing duties offset the effect of unfair subsidies. Countervailing duty trade remedies have been successfully pursued by a variety of domestic industries, including producers of steel, industrial equipment, computer chips, agricultural products, textiles, chemicals, and consumer products.
What is a Countervailable Subsidy?
Foreign governments subsidize industries when they provide financial assistance to benefit the production, manufacture or exportation of goods. Subsidies can take many forms, such as direct cash payments, credits against taxes, and loans at terms that do not reflect market conditions. The amount of subsidies the foreign producer receives from the government is the basis for the rate by which the subsidy is offset, or “countervailed,” through higher import duties. While governments can take many actions which could be said to confer benefits on their producers, not all of these actions are viewed as countervailable subsidies. Generally, the benefit must be limited to a specific group of firms or industries or to a firm’s export activities in order to be a countervailable subsidy. The U.S. statute and regulations establish standards for determining when an unfair subsidy has been conferred.
How is Subsidization Remedied?
If a U.S. industry believes that it is being injured by unfair competition through subsidization of a foreign product, it may request the imposition of countervailing duties by filing a petition with both Import Administration and the United States International Trade Commission (ITC). While Import Administration determines whether and to what extent unfair subsidization is occurring, the ITC determines whether the domestic industry is suffering material injury as a result of the imports of the subsidized products. The ITC considers all relevant economic factors, including the domestic industry’s output, sales, market share, employment, and profits. Both the ITC and Commerce must make affirmative preliminary determinations for an investigation to go forward.
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If Boeing get countervailing measures applied under US Tariff Acts, those countervailing measures would likely be in breach of WTO rules. Something similar happened with US tariffs on European steel imports a few years ago. The WTO found the US Tariff Acts themselves were in breach of WTO rules.
The reason the steel tariffs were a no no was due to the byrd amendment which gave the tariff monies to those harmed, instead of to the government.
The CVD filing in itself was not improper under WTO or any other agreement.
CVD btw is different than dumping issues
In 2002 Boeig stifled the filing by unions of a CVD petition cuz at that time they believed it would hurt the overseas sales – AND- under the terms of a CVD filing, Boeig wouuld have had to reveal their true costs of certain 767 models- which at that time were baseline for the tanker ( later fiasco )- thus giving the goverment different numbers for airframe ‘ costs’
How do I know this ? I had the (diS) pleasure of attending a meeting on the subject in which senior boeing officals ( Rudy de Leon ) gave some wild excuses regarding cvd and tanker. What we did NOT know at that time was the Sears/Dryun games being played.
And a year later in late 2002, I got the euro-sales response/excuse from a top offical …
I assume you mean current US law and not international law. There have been many WTO cases launched against the US as a result of this tactic.
Always with mixed results.
Off-topic, but nontheless interesting to watch:
– An Emirates Airbus A380 airplane on final approach at London’s Heathrow Airport gets struck by lightning. The aircraft landed safely with no damage.
http://www.youtube.com/watch?v=1-VUtJTj-U8
– A quite similar incident two years earlier, Boeing 747 gets struck by lightning during take-off. No damage reported.
http://www.youtube.com/watch?v=fyC_YMJmaSo
Probably French culinary products will
get some bashing and beating
just like the last time:
Wines, Cheese _and_ Fries 😉
Your totally correct on this piece!!