WTO dispute settlement — Airbus-Boeing disputes have provided an additional end of year complication

With both the United States and the European Union authorized to retaliate against the other for failure to conform subsidy practices for large civil aircraft after WTO dispute settlement proceedings and with both parties having retaliated in fact, an additional complication arose on December 30 as the U.S. Trade Representative’s Office announced a recalculation of products to be retaliated against to account for a difference in time periods used by the EU and the U.S. for purposes of determining the value of retaliation on particular products. The U.S. had used data from 2019, a time period prior to the pandemic. The EU used a later period (August 2019-July 2020) when U.S. exports were significantly lower to the EU. The U.S. has announced that it has changed its time period basis for retaliation to the same period used by the EU which will increase the number of products that are subject to retaliation. The U.S. also has questioned the inclusion/exclusion of the United Kingdom from the data calculations by the EU (reflecting the withdrawal of the U.K. from the EU). The USTR press release is embedded below and is followed by the USTR notice of changes that will take effect on January 12, 2021. The Federal Register notice will presumably be published next week.

New product coverage focuses on products from France and Germany, the two EU countries with the largest subsidies covered by the dispute.

The magnitude of the difference in trade retaliation rights based on time period selected can seen from the following table which looks at U.S. imports for consumption and U.S. domestic exports for the EU (28) and EU (27, i.e. without the U.K.) for 2019 and for August 2019-July 2020 periods.

Obviously which numbers or combination of numbers one uses to measure retaliation against during a pandemic can make a significant difference in the level of products retaliated against in fact. The U.K.’s departure from the EU adds it own level of complexity to the situation. With the U.S. and EU reportedly engaged in looking for a resolution of the long running disputes, the upping of U.S. retaliation to match what the U.S. perceives was the approach pursued by the EU will complicate the search for an acceptable solution. It may also complicate the start of the Biden Administration’s trade efforts vis-a-vis the European Union.