The term “carousel” brings to mind a carnival merry-go-round, with laughing children, cotton candy and calliope music. It has a much less benign connotation when used in international trade disputes, as our friends at the Trade Representative’s office have just reminded us.
After winning the interminable subsidies case involving Airbus before the World Trade Organization, the United States lost no time in imposing “retaliatory” duties against products from European Union countries. Such duties are intended to inflict economic pain on EU exporters, so that they pressure their governments to eliminate the subsidies and hence the reason for retaliatory tariffs in the first place.
That’s the theory, anyway. In practice, the Airbus subsidies remain in effect. Since the initial round of retaliatory duties failed to persuade the EU to get rid of them, USTR believes that another go at it might just do the trick. The “carousel” reference comes from this approach of periodically rotating different groups of products for tariff coverage.
USTR now seeks public comment on whether it should remove some products and add others to the retaliation list, along with the rate of duty that should apply. The Federal Register notice presents three annexes. The first lists “products currently subject to additional duties”, the second “products, originally published in the April and July 2019 notices in this investigation, under consideration but not currently subject to additional duties”, and the third “products being considered for imposition of additional duties.” The notice also asks “whether the rate of additional duty on specific products should be increased, up to a level of 100 percent.”
The carousel framework sets up a perverse zero-sum game for both exporters and the United States importers that actually pay the duties. For a product to be removed from the list, it’s pretty much a certainty that another product will have to take its place. Indeed, the Federal Register notice creates a scenario in which parties seeking to avoid tariffs on their products are encouraged to suggest covering other products instead:
With respect to products listed in Annex I, USTR invites comments on whether specific products of current or former EU member States should remain on or be removed from the list, and if a product remains on the list, whether the current rate of additional duty should be increased to as high as 100percent.
With respect to products listed in Annexes II and III, USTR invites comments on whether specific products of specific current or former EU member States should be included on a revised list of products subject to additional duties, and the rate of additional duty (as high as 100 percent) that should be imposed.
Of course, domestic competitors of potentially affected products will have their say as well.
In short, any exporters or importers whose products are covered in Annexes 1-3 should consider submitting comments as to why they should be excluded. The bold among them may want to argue why someone else’s products should be included. The comment period opened on June 26, and will close on July 26, 2020.