Boeing, aerospace group urge limits to US tariffs over EU subsidies

[WASHINGTON] Senior officials from Boeing and a US aerospace trade group on Wednesday urged the US government to narrowly tailor any tariffs imposed on the European Union over illegal aircraft subsidies to avoid harming American manufacturers.

Delta Air Lines warned that such tariffs would cause "serious harm" to the airline, its customers and workers since the US carrier is contractually obligated to buy Airbus aircraft worth billions of dollars.

The comments came at a two-day hearing held by the US Trade Representative's office on proposed tariffs on EU goods related to the long-running Boeing-Airbus subsidy dispute. Many smaller aerospace suppliers also testified.

Delta associate general counsel Scott McClain told the hearing that US tariffs should not be imposed on aircraft that Delta has already ordered from Airbus.

The United States and the EU have threatened to impose billions of dollars of tit-for-tat tariffs on planes, tractors and food in a nearly 15-year trans-Atlantic dispute at the World Trade Organization over aircraft subsidies given to Boeing and European rival Airbus.

A decision by the Trump administration to slap punitive tariffs on the EU over the long-simmering aircraft dispute would kick off major new tariff conflict at a time when the United States is already embroiled in an escalating and unpredictable trade war with China.

Theodore Austell, a Boeing legislative and regulatory affairs executive, said his company backed 100 per cent tariffs against Airbus imports to force compliance with World Trade Organization (WTO) findings, but said they should be limited to finished aircraft, along with wings, tails and fuselages imported from France, Germany, Spain and Britain.

Imposing tariffs on other categories such as undercarriages or other parts could damage the broader US aerospace supply chain, Mr Austell said in prepared testimony.

Representative Jeff Duncan, a Republican from South Carolina, where Boeing has a large manufacturing facility, said he did not favor tariffs as a long-term solution but the US government was right to push the EU to comply with WTO findings.

"US companies like Boeing are being taken advantage of by playing by the rules," he said. "The EU can avoid all tariffs in this case by eliminating its illegal subsidies to Airbus."

SUPPLY CHAIN DAMAGE

Remy Nathan, vice president of the Aerospace Industries Association (AIA), told the hearing that failure to negotiate a resolution could trigger "ever-escalating retaliatory tariffs".

Barring a settlement, he urged the US government to tailor any tariffs to avoid disruptions to the supply chains of the globally integrated US aerospace industry.

AIA submitted a list of specific items it said should be excluded from any US tariffs to ensure there was no inadvertent damage to the US industry, including components used in engine thrust reversers, inlets and fan cowls.

"The WTO has already found injury to the US industry. Imposing further tariffs on aerospace imports from Europe would aggravate that harm and further undermine the US industry's competitiveness in an already challenging global environment," Mr Nathan said.

Airbus said the tariffs could jeopardise 700 jobs it created in the US Gulf Coast region where it has invested US$1 billion.

Daryl Taylor, general manager of Airbus' Mobile, Alabama site, said the tariffs would have "potentially severe and detrimental impacts", including for 21 other aerospace firms that had also set up businesses in the region.

He said Airbus planned to expanded production of the A320 built there, and wanted to invest US$350 million more to build its A220 aircraft, a move that would generate 650 more jobs and make Mobile the world's fourth-largest aviation manufacturing hub.

REUTERS