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Britain on trade tightrope as fresh tariffs loom in aircraft spat

Mon, 12th Oct 2020 16:35

By Tim Hepher

PARIS, Oct 12 (Reuters) - Britain's push away from Europe
and its courting of closer trade ties with the United States
have landed London in a growing dilemma over billions of dollars
in looming Brussels tariffs in response to U.S. subsidies for
Boeing, trade sources say.

The World Trade Organization (WTO) on Tuesday is expected to
publish a confidential ruling allowing Europe to impose tariffs
on U.S. goods worth $4 billion a year, confirming a decision
first reported by Reuters.

The tariffs echo duties on $7.5 billion of European goods
including wine granted to the United States over European aid
for Airbus.

Together, the cases mark the largest ever WTO dispute and a
growing flashpoint in transatlantic trade ties.

Britain, where Airbus builds wings and employs 14,000
people, is involved in the 16-year-old dispute alongside fellow
Airbus backers France, Germany and Spain and the EU itself.

It has long lobbied on Airbus' behalf, but the timing of the
decision puts it in a delicate spot mirroring its strategic
position between the United States and Europe.

After a six-month delay due to the coronavirus crisis, the
second part of the dispute - allowing Europe to strike back - is
coming to a head just as trade negotiations between Britain and
the EU on one hand, and with Washington on the other, heat up.

Analysts say delaying backing for the EU tariffs could avoid
a damaging row with the United States, but weaken a four-nation
coalition behind Airbus and infuriate Brussels at a critical
point in negotiations over a European trade deal.

U.S. trade sources have warned that pressing ahead with
tariffs would be seen as an aggressive signal, one potentially
amplified by the rhetoric of a presidential election.

British Prime Minister Boris Johnson's government meanwhile
faces pressure to act from groups including Scotch whisky
makers, who have been hit hard by U.S. tariffs over the Airbus
subsidies case.

'ALL OPTIONS'

One potential scenario floated in the UK is to preserve good
faith with Airbus and the EU by imposing tariffs and aim to use
this as leverage to win concessions in a future U.S. trade deal
- though there is only a narrow window for such an approach.

Britain has so far indicated it is "100% behind Airbus",
said a European source, asking not to be identified.

The earliest the EU could impose tariffs would be late this
month after an Oct 26 WTO meeting, but sources on all sides it
is unlikely to act ahead of the Nov 3 U.S. presidential
election.

Airbus declined comment. Britain's trade ministry did not
respond to a request for comment.

Britain has said it is "exploring all options" as it seeks
a negotiated end to the dispute.

Its room for manoeuvre is also clouded by broader questions
over its post-Brexit legal status, especially if trade talks
between Britain and the EU collapse.

While Britain faces tariffs on products over the Airbus
subsidies case, some EU analysts say it could find itself unable
legally to impose retaliatory tariffs on U.S. goods because the
Boeing case is between the United States and the European Union,
which Britain has now left.

The U.S. complaint against Airbus had singled out the
Airbus-producing countries, including Britain.
(Additional reporting by Philip Blenkinsop, Andrea Shalal, Guy
Faulconbridge; editing by Jason Neely)

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