U.S. says EU has no legal basis to impose tariffs in aircraft dispute

The U.S. government on Tuesday threatened to respond if the European Union imposes tariffs on U.S. imports authorized by the World Trade Organization, arguing that the underlying violation involved a state tax break that was repealed in April.

In a statement, U.S. Trade Representative Robert Lighthizer said any move by the EU to slap tariffs on $4 billion of Boeing Co BA.N airplanes and other goods would be “plainly contrary to WTO principles and will force a U.S. response.”

Lighthizer said Washington would intensify negotiations with Brussels to restore fair competition and resolve the dispute.

He said the WTO arbitrator’s decision did not authorize the EU to retaliate against research and development subsidies provided to Boeing, and focused only on tax breaks provided by Washington State.

“Because Washington State repealed that tax break earlier this year, the EU has no valid basis to retaliate against any U.S. products,” he said.

Under WTO rules, a WTO member can apply authorized countermeasures only until the illegal measure, or the harm from that measure, is eliminated, which has already occurred in this dispute, Lighthizer said.

The WTO arbitrator did not take into consideration Washington State’s repeal of the offending tax provision, limiting its review to the impact from 2012 through 2015.

EU officials argue that the same is true of U.S. tariffs imposed against subsidies to the Airbus AIR.PA A380, which is being taken out of production.

USTR said Washington continues to impose tariffs on EU goods because of the EU’s failure to withdraw billions of euros of illegal launch aid subsidies for the Airbus A380 and A350 programs, but noted it had “exercised restraint” by not imposing the full amount of authorized countermeasures.