Trade Barriers are Rising, but Deal Still Possible

Mixed news on the trade agreement front. On the plus side, Japanese and US negotiators signed a deal providing better access to the Japanese market for US agricultural products. Farmers and ranchers had been at a disadvantage for the last couple of years since Japan joined the Trans-Pacific Partnership trade bloc and the US under President Trump left it.
In exchange, the Japanese will get lower tariffs on certain manufactured goods. Overall, US farmers should be happier than they've been, after losing market share in Japan and China.
The new NAFTA is still not done, with some Congressional Republicans charging Democrats with obstructing the agreement in order to deny the US President a victor. Democrats deny this, saying they favor improving the agreement and that the revised draft is getting closer to the improved labor and environmental standards they've been urging.
The fact that the WTO has decided in favor of the US is a complicated matter, involving allegations that the EU provided illegal subsidies to its continental champion Airbus. Airbus makes commercial jetliners and has a duopoly on such products with the American jet maker Boeing, which brought the case to the WTO.  Boeing claimed that subsidized loans, which in some cases were never paid, gave Airbus an unfair advantage.
It took the case more than 13 years to work its way through the WTO adjudicative process; where judges decided that the US could tariff EU goods to generate $7.5 billion. The US government has several options. It can negotiate a settlement with the EU government where it agrees to pay all or some portion of the award. If it does not agree to what's been ordered, the US can and has indicated it will place additional targets tariffs on imports of new Airbus jets to US airlines; along with French wines and cheeses, Spanish olive oil, and scotch whiskey. The EU points out that the tariffs on the airliners will hurt US companies because about 30 percent of the airliners consist of parts made in the US.
Indeed, parts were spared because of fear that American jobs would be lost at a plant in the US that assembles jets. Meanwhile, the UK has requested that scotch whiskey not be included in the final product list, but US trade officials said it remains on the list. Trade can be a difficult business.
The EU prefers a negotiated settlement, but no details of a possible deal have emerged even though the tariffs can be applied on October 19th.
The other wrinkle in this dispute is that the EU has filed a WTO case against Boeing, claiming that it received illegal subsidies in the form of tax breaks for years from the state of Washington; where Boeing makes many of its airliner models. The case was filed later than the Airbus case and so won't be decided until sometime in 2020.  However, the facts are known and can be compared by the disputants to see if the contours of a deal can be identified.
With new tariffs about to be imposed on the remaining imported goods from China, 2020 is looking more like the year of barriers to international trade. But we've also had some successes, so let's keep working to build on them.


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