On The Hill

EU Files Appeal in Boeing-Airbus Dispute

Earlier this week, the World Trade Organization (WTO) said the European Union (EU) has not done enough to end government subsidies for Airbus. The ruling serves as a green light for the Trump administration to leave in place the $7.5 billion of tariffed European imports it was awarded in October. What’s even more alarming for EU members is that the initial 10 and 25 percent duties imposed on aircraft and consumer goods, respectively, could be subjected to additional tariffs. “Today’s findings confirm that, despite losing in five previous WTO reports, Europe remains more focused on generating meritless litigation than it is in addressing the massive subsidies to Airbus that continue to harm the U.S. aerospace industry and its workers,” U.S. Trade Representative (USTR) Robert Lighthizer said. USTR announced an impending publication in the Federal Register to outline its process for raising tariffs and hitting additional goods. As of Friday morning, it has yet to publish such notice. On Friday (Dec. 6), the EU launched an appeal against the WTO compliance ruling, stating that is disagreed with the panel’s first decision. “We consider that the panel has made a number of serious legal errors in its assessment of EU compliance,” Commission Spokesperson Daniel Rosario said. The EU believes that Airbus’ cancellation of its A380 super-jumbo program had dealt with the U.S. complaint about EU subsidies for that program. Washington should therefore cut its retaliatory tariffs, the EU argued.^[1] 

Trump Takes Aim at French Imports over DST

As evident below, President Trump continues to double down on Section 301-related tariffs and investigations. On Monday (Dec. 2), the administration threatened to impose tariffs up to 100 percent on $2.4 billion French champagne and cheeses, a move that has prompted outrage by the European Commission. The announcement comes following a USTR investigation that found France’s digital services tax (DST) unfairly discriminates against large U.S. tech companies, most notably tech giants like Google, Facebook, Apple and Amazon. The tax is estimated to bring in between $500 million and $1 billion in revenue. “USTR’s decision today sends a clear signal that the United States will take action against digital tax regimes that discriminate or otherwise impose undue burdens on U.S. companies,” Lighthizer said in a statement. “The USTR is focused on countering the growing protectionism of EU member states, which unfairly targets U.S. companies, whether through digital services taxes or other efforts that target leading U.S. digital services companies,” Lighthizer added. USTR will hold a public hearing Jan. 7 on proposed actions and will seek public comment through Jan. 14. In response, France’s Economy Minister Bruno Le Maire announced the U.S. will face “strong retaliation” from the EU should tariffs be imposed. The minister’s comments were backed by EU Trade Chief Phil Hogan. “With regard to the section 301 investigation in the French digital service tax, the commissioner assured Minister Le Maire that this is a European matter.” Hogan said in a statement. “As in all trade-related matters, the EU will act and react as one,” he added. Le Maire also noted that France is willing to withdraw the DST should Washington accept the Organization for Economic Cooperation and Development’s (OECD) forthcoming proposal on global digital taxation. Ultimately, the likelihood of a multilateral solution any time soon is not promising.

Argentina, Brazil Lose Steel, Aluminum Tariff Exemption

Monday (Dec. 2) also saw President Trump announce the reinstatement of tariffs on aluminum and steel imports from Argentina and Brazil. The two countries were granted exemptions in May 2018. Now, those metals imports have found themselves in the administrations crosshairs due to devaluation of Argentina and Brazil’s currencies. “Brazil and Argentina have been presiding over a massive devaluation of their currencies. which is not good for our farmers. Therefore, effective immediately, I will restore the Tariffs on all Steel & Aluminum that is shipped into the U.S. from those countries,” Trump said in a tweet. Argentina’s government announced in May 2018 that it would voluntarily cap its aluminum and steel exports to the U.S. in order to escape the Trump administration’s tariffs. Days later, Brazil’s government agreed to a quota compromise with the U.S., announcing it would accept the administration’s 10 percent tariff on aluminum paired with a limit on steel exports. The president has long railed against other countries for allegedly devaluing their currencies in an attempt to bolster their bargaining power in global trade negotiations, while also complaining that the interest rates established by the U.S. central bank are too high.^[2] Trump’s decision to continue imposing tariffs on steel and aluminum via Section 232 of the Trade Expansion Act of 1962 could provoke legal challenges. Just last month, the U.S. Court of International Trade issued an opinion that faulted the president for violating the law by ignoring a 90-day deadline for imposing or altering tariffs. A group of bipartisan senators led by Pat Toomey (R-PA) continue to seek legislative means to rein in the president’s use of Section 232.

USMCA in Jeopardy?

The United States-Mexico-Canada Agreement’s (USMCA) arbitrary year-end deadline hangs in the balance of several notable revisions. Lighthizer is revisiting demands to strengthen the threshold for what qualifies as North American steel and aluminum. The goal of this revision is meant to garner U.S. labor support but could draw ire from Mexico. According to Politico, the latest point of contention between the two countries is a U.S. request to tighten the definition of North American steel and aluminum to ensure that it is melted and poured within the three countries — and not simply finished here — to fulfill a USMCA requirement. The countries agreed in the new deal to require automakers to purchase 70 percent of the steel and aluminum used from North American sources. Elsewhere, Mexico’s Undersecretary for North America Jesús Seade has called for revisions to the biomedicines portion of USMCA. While the Trump administration has applauded the biologics provision, House Democrats have repeatedly sought changes to it. The concern centers around the 10 years of intellectual property (IT) protection provided for biologics in the agreement, which many House Democrats fear could raise the prices of life-saving drugs. Lighthizer’s office has yet to respond but House Ways and Means Ranking Member Kevin Brady (R-TX) has urged him not to weaken or drop the provision. Representative Jan Schakowsky (D-IL), who has led efforts for the biologics provision to be completely dropped, said on Wednesday (Dec. 4) she had heard conflicting reports about where the issue now stands. “I’ve heard both that they are going to reduce the years, I’ve heard that it is going to come out. I don’t know,” Schakowsky said. The biologics change could harm Republican support for USMCA as it did during the Trans-Pacific Partnership (TPP) negotiations. Senator Ted Cruz (R-TX) and House Speaker Nancy Pelosi (D-CA) are championing a push for Lighthizer to strip USMCA of language that shields internet companies from liability over user-generated content. Cruz and Pelosi have urged the administration to delete the provision, which has drawn ire from top-ranking Republicans who’ve accused Pelosi of further delaying a vote on USMCA for political purposes. Critics argue that enshrining those protections in trade pacts will limit Congress’ ability to reconsider them domestically. In the U.S., digital platforms are broadly shielded from liability over user content under a little-known 1996 law known as Section 230 of the Communications Decency Act.^[3]  

References

^[1] Hanke, Jakob. “EU appeals WTO ruling on Airbus.” Politico Pro. 6 Dec. 2019. https://subscriber.politicopro.com/article/2019/12/eu-appeals-wto-ruling-on-airbus-3974727

^[2] Forgey, Quint. “Trump announces restored tariffs on Argentina, Brazil.” Politico Pro. 2 Dec. 2019. https://subscriber.politicopro.com/article/2019/12/trump-announces-restored-tariffs-on-argentina-brazil-1834326

^[3] Lima, Cristiano. “USMCA draws fresh bipartisan backlash over tech liability protections.” Politico Pro. 5 Dec. 2019. https://subscriber.politicopro.com/article/2019/12/usmca-draws-fresh-bipartisan-backlash-over-tech-liability-protections-3974717