EU Seeks WTO Authorization for Countermeasures

 

 

On the 25th local time, the European Union requested the World Trade Organization (WTO) Dispute Settlement Body to authorize countermeasures against imported products from the United States to compensate for the U.S. failure to comply with the panel's ruling in case DS577.

It is reported that recently, the EU's executive branch is finalizing a list of American products to retaliate against the previous government's imposition of tariffs on Spanish black olives.

EU seeks retaliation

Case DS577, namely the trade dispute between the EU and the U.S. triggered by Spanish olives. In August 2018, the government began to impose anti-subsidy and anti-dumping "double anti" tariffs on Spanish cooked olives imported to the U.S., with tax rates ranging from 30% to 44%; in 2019, the EU filed a lawsuit against the U.S. measures at the WTO.

In 2021, the WTO ruled in favor of the EU in case DS577. At that time, the WTO issued an expert panel report, ruling that the U.S. imposition of anti-subsidy taxes on Spanish cooked olives imported to the U.S. over the past three years violated WTO rules.

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Among them, the WTO expert panel ruled that the U.S. failed to prove that the Spanish government provided "specific subsidies" to olive producers, and there were errors in the U.S. calculation of subsidy rates for Spanish companies involved, etc.

According to the EU's statistics, before the imposition of the U.S. "double anti" tariffs, the total value of Spanish olives imported to the U.S. was 67 million euros per year. After the imposition of the "double anti" tariffs, the Spanish olive industry suffered heavy losses in exports to the U.S., with the total export value falling by nearly 60% during 2018-2021.

However, in 2021, the Appellate Body has been paralyzed due to the U.S.'s unilateral obstruction. If the U.S. maliciously appeals, this judgment cannot take effect. But at that time, the U.S. did not appeal the aforementioned ruling. According to WTO regulations, the U.S. must comply with the ruling before January 14, 2023.

According to the ruling of the WTO Compliance Expert Group in February 2024, the measures taken by the U.S., which it claimed to comply with the original expert panel's ruling, did not do so.

This time, the EU side stated that it has no choice but to demand retaliation. The EU also stated that it has noted the U.S.'s request to submit the matter to WTO arbitration, and looks forward to cooperating with the U.S. to enable the arbitrator to announce their ruling within 60 days.

The U.S. side stated that, according to the relevant regulations, the U.S.'s expression of opposition will automatically lead to the submission of the matter to arbitration.

The U.S. stated that, although it is not necessary, the Dispute Settlement Body may take note of this fact and confirm that it may not consider the EU's request for authorization as a result. The U.S. stated that it is willing to continue discussing this issue with the EU on a bilateral basis, but the EU's claim that the U.S. has not taken any action on this matter is incorrect, and the U.S. will continue to consult with relevant parties on solutions to resolve the ruling.

The WTO's Dispute Settlement Body stated that it has taken note of the issues raised by the U.S. that have been submitted to arbitration.

At the aforementioned meeting, the U.S. once again stated that it cannot agree to the proposal of 130 WTO members to initiate the selection process to fill the vacancies in the Appellate Body, which is the 81st time the proposal to initiate the vacancy filling process in the WTO has been blocked.

Some members stated in their speeches that they welcome the progress made in the formal dispute resolution reform process, but acknowledge that the 2024 target is difficult to achieve, and members need to consider how to lock in the progress made in the talks at the WTO's General Council meeting at the end of the year.

Previously, all parties reached a consensus during the WTO Ministerial Conference to establish a complete and well-functioning dispute resolution mechanism that all members can use before 2024.

EU prepares tariff list

While waiting for the WTO ruling, the EU is also finalizing a retaliation list.

European public opinion believes that this may become an early issue affecting EU-U.S. relations.

The European Commission spokesperson stated that this will allow the EU to impose import tariffs on U.S. products to offset the negative impact of the U.S.'s illegal tariffs on the economy until the U.S. complies with the WTO's ruling on this matter, and the EU is currently finalizing the specific product list targeted by its retaliatory measures.

Usually, the principle of the WTO is that the complainant should first try to strike products in the same sector as the products subject to the illegally imposed tariffs. If this is not feasible or ineffective, countermeasures can be taken against products from other sectors or products covered by other WTO agreements.

The former Director of International Relations at the European Commission's Directorate-General for Agriculture and Rural Development believes that it is not necessarily targeted at agriculture, "The default rule is barter, which means the European Commission will identify some U.S. export goods worth 35 million U.S. dollars."

He stated that the tariff details and retaliation list are extremely confidential and a "strictly guarded secret", and the European Commission has strategically targeted products such as bourbon whiskey and Harley-Davidson motorcycles produced in the U.S. Republican strongholds in the past.

At present, the U.S. remains the largest market for Spanish olives, accounting for about 35% of its total exports.

Data from Copa Cogeca, the largest farmers' lobby organization in the EU, shows that since the imposition of tariffs, Spanish olive producers have spent 17 million euros on legal fees and lost nearly 300 million euros in exports to the U.S.

The organization stated that it supports the actions of the European Commission because it sends a clear message to third-country partners that the EU's Common Agricultural Policy (CAP) supports rules in line with the WTO, and the European Commission will also take action to protect it.

Faced with tariff threats, Europe will still adopt a two-step strategy, first, trying to resolve the issue through negotiations, and if negotiations fail, more forceful measures may be taken.

There is already news that the EU has contacted the transition team to seek a compromise. If negotiations fail, Europe may take more forceful measures, such as imposing a 50% retaliatory tariff.

The EU plans to formulate a "carrot and stick" response strategy. EU negotiators will immediately contact them to seek a trade agreement as soon as possible, increase imports of specific U.S. products, and avoid imposing tariffs on EU products. If the first step fails, the EU will wield the "stick" and retaliate by imposing tariffs on U.S. products. It is revealed that the EU is drawing up a list of imported U.S. products, and products on the list may be subject to tariffs of 50% or higher.