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Trade Update (July 27)

Jul 27, 2020 | SHARE  

Boeing – Airbus Dispute

In an attempt to end the decades-long dispute, on Friday (Jul. 24) Airbus moved to halt subsidies for its A350 airliner. The company has agreed to pay a higher interest rate on loans granted by the governments of Spain and France.[1] The loans were one of the forms of aid to the company that the WTO found illegal. Airbus said it hoped this would encourage the U.S. to end its retaliatory tariffs on European goods. 

On Friday (Jul. 24), the European Union called on the U.S. to remove “unjust tariffs on European tariffs on European products.” The European Commission said member states and Airbus have changed their policies “to reflect market conditions,” and argued they are now in full compliance with rulings in the dispute.[2] 

“This means that the European Union and the Member States concerned…are in full compliance with the rulings of the World Trade Organization in the Airbus case. This removes any grounds for the U.S. to maintain its countermeasures on EU exports and makes a strong case for a rapid settlement of the long-running dispute,” the European Commission said in a statement.

European Commissioner for Trade Phil Hogan warned the EU would retaliate if the U.S. did not return to negotiations. “In the absence of a settlement, the EU will be ready to fully avail itself of its own sanction rights,” Hogan said.

To view the European Commission’s statement, click here.

Various industries have reacted to Airbus’s decision. The Spanish Federation of Food and Drink Industries said, “we hope after today’s announcement by Airbus, the United States will immediately withdraw the unfair tariffs on Spanish food products,” and the Distilled Spirits Council of the U.S. said, “we hope that this is a significant step toward resolving this longstanding trade dispute that will result in the prompt elimination of tariffs on U.S. and EU distilled spirits. Distillers on both sides of the Atlantic have suffered enough.”[3] 

The Office of the U.S. Trade Representative (USTR) received over 14,000 comments on its proposal to “revamp” tariffs on the European Union over the Airbus dispute.[4]

USTR is expected to announce changes to the $7.5 billion retaliation list by Aug. 12.


US – China

On Wednesday (Jul. 22), the State Department announced it directed China to close its consulate in Houston, Texas. The State Department said the closure was ordered to protect American intellectual property and the private information of U.S. citizens.

Additionally, the U.S. is considering a ban on Chinese-owned mobile apps and removing Chinese technology from the electrical grid. President Trump has also cut off further trade talks and threatened to penalize China over its pandemic response.[5] 

A Chinese foreign ministry spokesperson called the American order to close the consulate an, “outrageous and unjustified move that will sabotage relations between the two countries.”

On Thursday (Jul. 23), Secretary of State Mike Pompeo said the traditional approach to American engagement with China has failed.

“What do the American people have to show now 50 years on from engagement with China?” Pompeo said. “Did the theories of our leaders that proposed China’s evolution toward freedom and democracy prove to be true? Is this China’s definition of a win-win situation? And indeed centrally from the Secretary of State perspective, is America safer?”[6] 

Pompeo cited the Chinese Community Party’s (CPP) poor response to COVID-19, detention camps for ethnic Uighurs in Xinjiang, and tightened control over Hong Kong as reasons for his scrutiny of the county’s leadership.


Supply Chain

On Wednesday (Jul. 22), Senators Lindsey Graham (R-SC), Shelley Moore Capito (R-WV), and Mike Rounds (R-SD) introduced a bill to decrease U.S. dependence on countries like China for critical personal protective equipment (PPE).

The “U.S. MADE Act of 2020,” would provide subsidies for domestic producers, and is modeled after the Berry Amendment, which requires the Department of Defense to give preference in procurement to U.S.-made clothing and textile products. It also outlines PPE acquisition requirements for the Strategic National Stockpile and would establish a 30 percent investment tax credit for qualifying PPE manufacturing products.[7] 

To view the bill, click here.

On Thursday (Jul. 23), World Trade Organization Director General Roberto Azevêdo encouraged nations to renegotiate new rules to help deal with future crises like the COVID-19 pandemic.

“We need to have mechanisms in place that will kick in automatically because the knee jerk reaction (in) any emergency like a pandemic of this nature is to protect the ones that are close to us,” Azevêdo said. First instincts, he said, “do not always favor the kind of cooperation that is needed to truly address and effectively address a crisis that is global in nature.”[8] 

On Thursday (Jul. 23), the House Ways and Means Subcommittee on Trade held a hearing on trade, manufacturing, and supply chains. To view an executive summary of the hearing, click here.


CIT Ruling

Last week, the Court of International Trade (CIT) overturned President Trump’s decision to double Section 232 tariffs on steel imports from Turkey. The ruling establishes that there are limits to the president’s authority to impose national security-related tariffs.

The court said Trump violated Section 232 procedures, which require the president to make a decision on restricting imports within 90 days of receiving a recommendation from the Department of Commerce, and then to implement that action within another 15 days. In 2018, Trump doubled the steel tariffs on Turkey solely by issuing a proclamation.

“Contrary to the government’s contention, there is nothing in the statute to support the continuing authority to modify proclamations outside of the stated timelines,” CIT Judge Jane A. Restani said in the ruling. “The government offers no citation to the statute nor to the recent legislative history to support this theory.”

The CIT emphasized it was not saying there was no national security threat from Turkish steel products, but that there was no procedurally proper finding of that threat.

The ruling leaves the White House’s ability to impose Section 232 tariffs intact as long as it follows the correct procedures.[9] 

The decision will likely allow importers of steel to obtain refunds of the excess duties paid. Additionally, it may prevent potential Section 232 tariffs on imports of automobiles and auto parts.

The Supreme Court recently declined to review a separate decision upholding the constitutionality of Section 232’s delegation of tariff authority from Congress to the president.



[1] Vela Hanke, Jakob. “EU asks Washington to end tariffs after Airbus scraps A350 subsidies.” Politico Pro, 24 Jul. 2020. https://link.edgepilot.com/s/f3db4b1c/2PdeWFjC5kG_OHH9-6nnPw?u=https://subscriber.politicopro.com/article/2020/07/eu-asks-washington-to-end-tariffs-after-airbus-scraps-a350-subsidies-1969855

[2] “EU: Airbus, member states in full compliance in WTO dispute.” Inside U.S. Trade. 24 Jul. 2020. https://link.edgepilot.com/s/187f0bf0/6Bun_CThI0iknpK8bqk9Vw?u=https://insidetrade.com/daily-news/eu-airbus-member-states-full-compliance-wto-dispute

[3] “Factbox: Industry reactions to Airbus offer to end subsidy dispute.” Reuters, 24 Jul. 2020. https://link.edgepilot.com/s/b9c2a511/1m9xjVRH2kmHkMg2f_1EAg?u=https://www.reuters.com/article/us-wto-aircraft-airbus-reaction-factbox/factbox-industry-reactions-to-airbus-offer-to-end-subsidy-dispute-idUSKCN24P20T

[4] Rodriguez, Sabrina. “The revolt of the wine industry.” 24 Jul. 2020. https://link.edgepilot.com/s/8a40c27d/BVu6uVzie0qcukVC7YgdjA?u=https://subscriber.politicopro.com/newsletter/2020/07/the-revolt-of-the-wine-industry-789401

[5] Bade, Gavin & Forgey, Quint. “State Department orders China to close its consulate in Houston.” Politico Pro, 22 Jul. 2020. https://link.edgepilot.com/s/f021e026/txT8IFy86UuaLErdKS2nig?u=https://subscriber.politicopro.com/article/2020/07/state-department-orders-china-to-close-its-consulate-in-houston-1968473

[6] Choi, Matthew. “Pompeo: U.S. engagement with China has failed.” Politico Pro, 23 Jul. 2020. https://link.edgepilot.com/s/82f8800f/_PH3Z88D8UWDih9Uaxu2dw?u=https://subscriber.politicopro.com/article/2020/07/pompeo-us-engagement-with-china-has-failed-1969635

[7] Rodriguez, Sabrina. “U.S.-China ties go from bad to worse.” Morning Trade, 23 Jul. 2020. https://link.edgepilot.com/s/eb30be21/_XFCmlGN7kumJ-l3u621fw?u=https://subscriber.politicopro.com/newsletter/2020/07/us-china-ties-go-from-bad-to-worse-789369

[8] Palmer, Doug. “Outgoing WTO chief urges new trade rules to deal with health crises.” Politico Pro, 23 Jul. 2020. https://link.edgepilot.com/s/d17d9f9a/NPruOb7UUUK_ZcOyADq23g?u=https://subscriber.politicopro.com/article/2020/07/outgoing-wto-chief-urges-new-trade-rules-to-deal-with-health-crises-1969163

[9] Palmer, Doug. “Ruling in Turkey steel case sets limits on Trump’s tariff use.” Politico Pro, 14 Jul. 2020. https://link.edgepilot.com/s/a24fb02a/7CqeHbOGK0CidmXCEC82ag?u=https://subscriber.politicopro.com/article/2020/07/trump-steel-tariffs-turkey-europe-3982495


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