29 April 2019
EU Publishes Draft List of Goods Which Could Be Targeted by Retaliatory Measures If Imported from US
On 17 April 2019, the European Commission published a draft list containing the details of products that could be targeted with additional punitive tariffs when imported into the European Union from the United States. The publication follows a victory for the EU at the Dispute Settlement Body (“DSB”) of the World Trade Organization, which ruled in March 2019 that the US had failed to end an illegal tax break to the American company Boeing. The US, for its part, had earlier announced that it plans to target up to $11 billion of European products, in response to WTO rulings against subsidies provided to the European company Airbus.
Although the European Commission’s draft list covers $20 billion worth of US-origin imports, it has underscored that any retaliation which it puts in place would likely be at a lower level. In fact, the Commission has calculated that it would be allowed to impose countermeasures that are worth up to $12 billion. That said, the final verdict on the amount that may be imposed by each trading bloc in the Airbus and Boeing cases would be decided by WTO arbitrators.
In the framework of any WTO dispute, if, within 20 days from the expiry of a reasonable period of time, the parties have not agreed on satisfactory compensation and if the defeated party has failed to implement the ruling issued by the DSB, the prevailing party may ask for authorisation to impose trade sanctions against the other. The prevailing party is thus allowed to impose countermeasures that would otherwise be inconsistent with WTO law, in response to a finding of violation by the DSB against the defeated party. This is informally called “retaliation”. Additionally, in the event that the defeated party objects to the level of retaliation or claims that the WTO’s laws and principles have not been complied with when requesting authorisation to impose the trade sanctions, the matter shall be referred to WTO arbitration. In the present case, both the EU and the US have decided to refer the case to WTO arbitration.
In view of the above, Hong Kong traders with an interest in this matter should note that the European Commission has published the draft list of products it wishes to target with retaliatory measures, for consultation purposes, while waiting for the final report to be issued pursuant to WTO arbitratration. The draft list will be open for consultation until 31 May 2019. An EU official has reportedly stated that the publication of the draft list will provide EU businesses with the chance to alert the Commission of any damage that could be caused to them by the imposition of extra duties on specific products. Stakeholders will thus have a chance to shed light on any negative ramifications of the potential measures, that could affect their interests.
As it stands, the draft list published by the European Commission contains a sweeping range of products, from tomato ketchup to large civil aircraft. It also includes common consumer items, such as, but not limited to, the following. For exact descriptions and CN codes, please refer to the draft list.
- video game consoles,
- electric car racing sets having the character of competitive games,
- exercise apparatus and articles and equipment for general physical exercise, gymnastics or athletics,
- bandages and similar articles of textile materials,
- frames, front forks and rims for cycles,
- travelling-bags, toilet bags, rucksacks and sports bags, with outer surface of plastic sheeting,
- wallets, purses, key-pouches, cigarette-cases, tobacco-pouches and similar articles,
- trunks, suitcases and other bags,
- cotton, carded or combed,
- billiards of all kinds and accessories,
- playing cards.
It is noteworthy that, should the additional tariffs eventually be imposed on these and any of the other listed goods of US origin, it could open up trade opportunities for like products hailing from other third countries including Hong Kong and mainland China, for import into the EU.
Despite the possibility of putting in place the retaliatory trade measures, the European Commission continues to pursue negotiations with the US. It seeks to cut tariffs on industrial goods by aiming to arrive at a bilateral trade pact. The US has also explained that the ultimate goal is to reach an agreement with the EU so as to end all WTO-inconsistent subsidies.
Hong Kong traders should expect final reports by WTO arbitrators, where the level of retaliation and the products subject to the tariff measures will be determined, at two different times. The case brought by the US against the EU is at a more advanced stage. A report pursuant to WTO arbitration in the framework of this case is expected to be delivered in the summer of 2019. On the other hand, the report pursuant to WTO arbitration in the case brought by the EU against the US is expected to be issued in (possibly early) 2020.