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7th Dec 2019

EU drafts $20bn US sanctions list in aviation dispute

The European Union is gearing up for a possible trade war with the United States as part of a dispute over US subsidies to its aircraft maker Boeing.

On Wednesday (17 April), the European Commission published a list of US imports totalling €17.4bn that could face extra import duties.

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The list spanned everything from coal to wine, video game consoles and school satchels sold in the European Union.

Businesses mostly based in Europe have until the end of May to consult the list and raise any objections.

An EU official told reporters the listed US products can be substituted elsewhere to offset any possible price hikes to European consumers.

"There are other sources of supply possible in the world, so normally, globally, the supply of European consumer or the global value chain should not be dramatically affected," he said, noting that China also produces aircraft.

The threat comes at a tricky time.

On Monday, the two sides agreed to launch trade talks to cut industrial duties despite objections from by France and Belgium.

Weak US environmental standards and issues over agricultural goods reportedly factored into the objections.

It also comes amid a dispute over US threats to sanction EU firms doing business in Cuba.

And it comes amid wider trade clashes, on steel and aluminium, on cars, and on natural gas supplies in the years since US president Donald Trump came to power.

For its part, the US has launched its own case against its European rival, aircraft maker Airbus, claiming $11bn in damages.

But the European Commission appeared determined to stand its ground in fighting talk on Wednesday.

It told reporters that while it preferred a negotiated settlement, it would not hesitate to impose sanctions if the US ignored a recent World Trade Organisation (WTO) ruling.

"We must continue to defend a level-playing field for our industry," said EU trade commissioner Cecilia Malstroem in a statement.

A WTO ruling in early April found that a tax programme in Washington State, where Boeing is based, aims to unlawfully subsidise the American airline giant up until 2040.

With its list out on Wednesday, the EU commission is now paving the way for a worst-case scenario by preparing future sanctions.

The counter measures against Boeing subsidies will not be known until the final decision is made by the WTO over the case, possibly in 2020.

The EU commission estimates the Boeing subsidies to be worth around $12bn, but that figure is in doubt.

"The final figure may not be $12bn, it may be $12bn, we don't know but it is a process that we have to work our way through," the EU official said.

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