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Import tariff war

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Belén Palao analyses in Expansión the import tariff war between the US and the EU over a wide range of products and industrial goods

For some time now, we have witnessed an open trade war between the United States (USA) and the European Union (EU), which clashes head-on with the opening of negotiations in order to eliminate tariffs on a wide range of industrial goods.

Thus, last week the decision of the arbitrator appointed by the World Trade Organisation (WTO) was published in the framework of the actions carried out as a result of the complaint filed by the USA in relation to the Airbus case. This dispute started in 2004 and affected the Governments of Germany, France, Spain and the United Kingdom as well as the European Communities, as the US considered that certain aid granted to the aeronautical industry and, in particular, to Airbus, could be incompatible within the framework of the General Agreement on Tariffs and Trade (GATT).

In his recent decision, the WTO arbitrator authorizes the imposition of corrective measures equivalent to $7.5 billion per year, pending ratification by the Dispute Settlement Body, at the meeting to be held in Geneva on 14 October 2019.

For its part, at the time, the EU denounced the US for the aid granted to Boeing, Airbus' main competitor, and the opinion of the arbitrator appointed by the WTO has yet to be issued. In this case, the amount of the corrective measures to be imposed requested by the EU would amount to €10.6 billion.

Although the United States published a first list of goods affected more than six months ago, a final list was published on 2 October which, in the case of Spain, as an integral part of the Airbus consortium, would fundamentally affect the agri-food sector (cheeses, olive oil, olives, liqueurs, still wines, pork -excluding ham-, cherries, peaches, pears, fruit preparations and cherry juices, plums, pears or vegetable juices, clementines, mandarins, lemons, oranges, mussels, clams, cockles and other molluscs).

Surprisingly, the imposition of these tariffs creates clear distensions within the EU Member States. Thus, in the case of oil, virgin olive oil and olive oil of Italian, Greek or Portuguese origin are excluded. On the other hand, in the case of wine, the tariffs affect France and Spain, leaving out wine of Italian origin.

Necessary common position 

In other similar cases before the WTO, although the imposition of tariffs was authorized, to date, none of the affected countries has opted to impose corrective measures automatically, trying to reach a consensual solution in such a way that, traditionally, the threat of imposition of corrective measures was used as a throwaway weapon to force a negotiated solution between the parties.

However, the possibility of reaching a negotiated solution requires a clear position on the part of the EU and the creation of a common front by all the Member States, which could be blurred by the current political situation in the EU and the existence of preferential treatment by the Trump Administration for countries that could clearly benefit if, finally, the proposed measures are approved.

The absence of a consensual solution paints a very negative scenario for the Spanish countryside. The current situation of political inaction in our country and the lack of competences in the design of trade policy, such competences being in the hands of the European Commission, make it difficult for Spain to adopt any type of compensatory measure in defence of its interests.

In the medium term, a potential measure would be the approval of the so-called digital tax. However, this new tax, although it could affect certain American companies, does not seem to be the appropriate instrument, given that its scarce collection would not allow the negative effects derived from the imposition of the tariffs proposed for the agrifood sector to be reversed. For all these reasons, we can only hope that, finally, on 14 October, both parties will try to resume the negotiations that would do so much good to the Spanish agri-food sector.

You can see the article in Expansión.

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