MIAMI – This weekend, a breakthrough has been made in a 17-year dispute regarding aircraft subsidies to both Boeing and Airbus. A new five-year “ceasefire” agreement was reached between the US and the EU as both sides agreed to remove tariffs placed on each other.
The AP reports today that the breakthrough comes as President Biden and US personnel meet with European representatives during the president’s European visit for the G7 summit.
The World Trade Organization ruled in 2004 that the EU violated its ruling on subsidies to Airbus. Likewise, it ruled that the US was providing illegal funding to Boeing.
After years of dispute, the Trump administration escalated the situation by placing what could have amounted to US$7.5bn in tariffs on European exports. Last November, the EU responded by placing up to US$4bn on punitive duties on American-made goods.
The Trump administration then placed tariffs on non-aviation-related items, like European wine and German baked goods. The EU hit back with duties on jeans and US Bourbon.
This agreement eliminates these fees. “Instead of fighting with one of our closest allies, we are finally coming together against a common threat,” U.S. Trade Representative Katherine Tai said, mentioning China.
In the AP article, Tai said the two sides have come to terms on a five-year agreement to suspend the tariffs at the center of the conflict. However, she said that the US could reimpose the tariffs if US companies aren’t able to “compete fairly” with those in Europe.
“Today’s announcement resolves a long-standing irritant in the U.S.-EU relationship,” Tai said, as Biden met with EU leaders in Brussels. “Instead of fighting with one of our closest allies, we are finally coming together against a common threat.”
In March, shortly after Biden took office, the two sides agreed to a four-month suspension of the tariffs. This new agreement will be in effect for five years and goes into effect on July 11.
A New Chapter
“This really opens a new chapter in our relationship because we move from litigation to cooperation on aircraft — after 17 years of dispute,” said European Commission President Ursula von der Leyen. “It is the longest trade dispute in the history of the WTO.”
Both sides said they would also work together to analyze and address the “non-market practices of third parties that may harm our large civil aircraft sectors,” according to the EU’s executive branch.
Quoted by AP, German Economy Minister Peter Altmaier described it as “an important signal for trans-Atlantic cooperation and the new beginning in trans-Atlantic relations.”
“We need fewer, and not more, tariffs, because tariffs ultimately cause damage on both sides of the Atlantic,” Altmaier said in a statement. “Today’s agreement is above all a great relief for the German exporters that had special tariffs imposed.”
Featured image: Boeing 737 MAX 7. Photo: Brandon Farris/Airways