BRUSSELS (Pakistan Point News / Sputnik - 04th October, 2019) Scotch whisky, Italian cheese and French wine have been unexpectedly dragged into the Airbus-Boeing rivalry after the United States decided to target them with retaliatory sanctions in the long-lasting subsidy row, triggering a strong reaction from EU producers and the bloc itself.
On Wednesday, the World Trade Organization (WTO) ruled that the United States can impose tariffs on $7.5 billion worth of goods from the European Union as retaliation for the bloc's unlawful subsidies to Airbus. Washington is now requesting 10 percent tariffs on civil aircraft and 25 percent tariffs on a number of food products imported from EU countries.
French, Spanish, German and UK still wines, plus single malt Scotch whisky, are among those targeted by the tariffs. Italian wines are absent since Washington holds responsible those European countries who are involved in the production of Airbus jets. Yet, the US anger did not spare Italy either, with its cheese falling victim to the damaging tariffs too.
For years, the two aviation giants have been competing neck to neck to be number one in aircraft manufacturing and sales. The European Union and the United States accuse each other of giving unlawful subsidies to their flagman companies.
While President Donald Trump has hailed the WTO decision as a "nice victory," the UN watchdog will have to rule on Europe's subsidy complaint in eight months. The bloc has already asked for a similar amount of "countermeasures" in response to US support for Boeing.
EU RPODUCERS BAFFLED: WINE AND WHISKY BOTTLES DON'T FLY, DO THEY?
The US decision to punish EU wine and spirits with huge tariffs in response to the unrelated standoff in the aviation industry has come as a "cold shower" for producers.
"What is difficult to accept is that the USA has taken other sectors, the Wine and Whisky sector, to impose heavy levies, at a level of 25%, while they only impose levies of 10% on new European planes. Are bottles of wine flying? No, so they should limit their measures to the aircraft manufacturing industry!" Ignacio Sanchez Recarte, the secretary general of the European Wine Companies Committee (CEEV), told Sputnik.
According to Recarte, though the levies are ad valorem, which makes it possible to declare lower value of goods at customs, consumers will still "see the difference and feel the pinch."
"What is very detrimental is for the importers to have to change their product from category, in terms of marketing and sales. It also questions future sales. The American market is highly competitive for wines, with their own national production and the wines from South America or Australia for example, so for the European producers and exporters, it is really a cold shower if - as announced by the US, the tariffs start being applied from October 18," he explained.
The reaction is just as surprised and angry in the Scotch Whisky Association (SWA), for which the US market accounts for 22 percent of their global value and 10.7 percent of global volumes.
The tariffs, according to SWA chief executive Karen Betts, are a "heavy blow" to the industry since Single Malt Scotch Whisky represents over half of the total value of UK products on the US tariff list.
Betts also recalled that EU-US trade in spirits had been tariff free for the last 25 years, boosting "investment, employment and prosperity" on both sides of the Atlantic. Now, the situation would change, because of the unrelated dispute over aircraft subsidies.
"If the levy is applied, we expect a negative impact on investment and job creation in Scotland, and longer term impacts on productivity and growth across the industry and our supply chain ... These damaging tariffs must not take effect," she said.
The Scotch Whisky Association chief therefore urged the European Union and the United States to "take urgent action" to ensure that the latest tariffs will not take effect and "other tariffs - including on the export of American Whiskey to the EU - are removed quickly."
EU READY TO RETALIATE, WARNS US ABOUT LOOMING BOEING CASE
EU-US trade tensions have been mounting since the Trump administration introduced tariffs on steel and aluminum imported from Europe on May 31, 2018. The next month, the bloc retaliated with 25 percent tariffs on American motorcycles and other items, including US whiskey.
A day after the US fresh tariff announcement, a European Commission press briefing was almost fully overshadowed by this hot topic.
President Juncker, however, made it clear back on Wednesday in his speech at the American Chamber of Commerce, that "if someone is imposing tariffs on our aviation sector, we will do exactly the same,"
Following the official publication of the WTO award to the United States, EU Commissioner for Trade Cecilia Malmstrom mainly echoed Juncker's statement, but also warned about the looming Boeing case.
"We remain of the view that even if the United States obtains authorisation from the WTO Dispute Settlement Body, opting for applying countermeasures now would be short-sighted and counterproductive ... In the parallel Boeing case, the EU will in some months equally be granted rights to impose countermeasures against the U.S. as a result of its continued failure to comply with WTO rules," she said.
According to Malmstrom, the mutual imposition of countermeasures would "only inflict damage on businesses and citizens on both sides of the Atlantic, and harm global trade and the broader aviation industry at a sensitive time." She therefore called for search of a "fair and balanced solution" to the dispute between aircraft industries.
"Our readiness to find a fair settlement remains unchanged. But if the U.S. decides to impose WTO authorised countermeasures, it will be pushing the EU into a situation where we will have no other option than do the same," she concluded.
AIRCRAFT MANUFACTURING INDUSTRY HIT BY 10% LEVY, UNLIKE WINE
Unlike wine, cheese and wool sweaters, "new European aircraft" were hit by 10 percent tariffs. The measure notably does not apply to parts produced by a myriad of smaller companies in the aircraft manufacturing industry on both sides of the Atlantic.
Sputnik turned to a Belgian producer of components for the industry, the Sonaca group, which has large subsidiaries in Brazil, in Canada, China and the United States. Sonaca produces mainly slats, for the wings of all Airbus planes, from the smallest, the A320 to the jumbo A380. It also produces parts for other plane manufacturers, such as Dassault, Bombardier and Boeing.
"We produce components, but of course our customers are hit and will certainly try to reduce costs to compensate for the price hike that they will have to apply. The fact that we deliver parts to Boeing does not play any role for us in the dispute between the two aircraft manufacturing giants," he added.
Yet, Faury stressed that it "would be very bad for the industry" if the sides went ahead with tit-for-tat tariffs.
ITALY WONDERS WHY WHOLE EU SHOULD PAY FOR AIRBUS ROW AS TARIFFS DOT NO SPARE ITS CHEESE
Apart from planes and above-mentioned products, Italian cheese, in particular, Pecorino, Parmesan and Provolone, as well as ham have been also targeted by US tariffs.
In a comment to Sputnik, Nicola Bertinelli, the president of the Parmigiano Reggiano (the official name of the original Parmesan cheese) Consortium, wondered why "Italy, which has nothing to do with the Airbus consortium now has to pay a truly senseless price."
Andrea Picchielli, a member of Italy's Lega party, is similarly perplexed.
"I don't think that this is the correct answer in retaliation for illegal government aid to Airbus SE. And why, if some country as France has done some errors, all the EU should pay for them? These tariffs will have a huge impact on the EU economy: especially on France but also Italy will be hit especially in the food export," Picchielli told Sputnik.