Britain on trade tightrope as fresh tariffs loom in aircraft spat

By Tim Hepher

PARIS (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 <BA.N>, 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 <AIR.PA>.

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)