September 26, 2019 / 1:57 PM / 2 months ago

WTO to back around $7.5 billion U.S. tariffs on EU in aircraft spat: sources

PARIS/BRUSSELS (Reuters) - The United States has been granted approval to impose tariffs on European Union goods with an annual trade value around $7.5 billion over illegal government support for European planemaker Airbus (AIR.PA), people familiar with the matter said.

FILE PHOTO: European Union flags fly outside the EU Commission headquarters in Brussels, Belgium September 19, 2019. REUTERS/Yves Herman

The decision brings the transatlantic trade powers closer to a tit-for-tat tariff war in the aircraft industry after a 15-year-old dispute at the World Trade Organization, although some analysts believe it will be settled without a trade fight.

The WTO has found that both Airbus and its U.S. rival Boeing received billions of dollars of subsidies in a pair of cases marking the world’s largest ever corporate trade dispute. Both sides have threatened tariffs after the Geneva body found neither adhered fully to its findings.

Washington sought permission to impose tariffs up to 100% on European goods worth $11.2 billion a year. Those include aircraft and aerospace parts from Airbus host nations - Britain, France, Germany and Spain - as well a range of goods including wine, cheese and luxury goods from across the EU.

The scope of the tariffs depends on an arbitration tribunal expected to announce both a value and a methodology next week.

The people said the tribunal had approved U.S. tariffs on goods with an annual trade value of around $7.5 billion - lower than the U.S. request, which is typical in such cases, but still what one person close to the case called a significant amount.

Bloomberg News reported the figure close to $8 billion.

None of the governments or companies agreed to comment.

Washington has drawn up a list of goods worth a total of $25 billion from to choose items to target if it goes ahead with the tariffs.

One person close to the case said Washington was likely to go ahead, opening a new front in global trade tensions, after informal overtures from both sides failed to end deadlock.

The EU cannot retaliate immediately to any tariffs as it did following what it considered to the United States’ unlawful imposition of tariffs on steel and aluminum imports in 2018.

Its counter-case at the WTO against U.S. support for Boeing, in which it seeks about $10 billion in tariffs, is not expected to reach the same stage for six months - meaning Washington is free to fire the first shot in any potential tariff war.

One option being mooted on the EU side is to use an existing war chest of retaliation left over from an earlier case.

In 2002, the WTO granted the EU the right to hit $4 billion of U.S. imports in a dispute over U.S. tax breaks for sales of exported goods. The two sides reached a settlement in 2006, ending the sanctions and notifying the WTO of their agreement. However, U.S. compliance was never formally tested at the WTO.

FILE PHOTO: The logo of Airbus is pictured at their facility in Montoir-de-Bretagne near Saint-Nazaire, France July 12, 2019. REUTERS/Stephane Mahe

The U.S. would contest such a move, sources said.

The EU has also moved to reopen hearings on whether it complied with previous WTO findings, but U.S. sources insist all the procedures on that case have been exhausted.

(This story restores dropped word `neither’ in third paragraph)

Reporting by Tim Hepher, Philip Blenkinsop, Andrea Shalal; editing by Dominique Vidalon, Larry King

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