MIAMI – During an interview with the German magazine Der Spiegel, EU Trade Commissioner Valdis Dombrovskis indicated that the EU was willing to propose a six-month freeze on tariffs in order to ease the ongoing dispute between Airbus and Boeing on state aid.
The tariff is applied to billions worth of commodities going from wine to cheese, cars, and airplanes.
This new measure will go beyond the four months moratorium already in force since last March and intends to send a strong signal towards ending a more than a decade-long feud opposing Boeing and Airbus in WTO (World Trade Organization) discussions on state aid that both sides consider illegal.
The European Commission has indicated repeatedly that it wants to resolve the dispute and has been in talks with the US Trade Representative (USTR).
What is the Spat about?
In a gist, the European Union and the United States claim that each other’s airplane manufacturer is unfairly subsidized.
It was the US that first filed a lawsuit with the World Trade Organization (WTO) in 2006 alleging that Airbus, which is jointly owned by Germany, France, Spain, and Britain’s BAE Systems, had earned US$22bn (€19.4bn) in illegal subsidies. According to US officials, the subsidies benefited the economy by more than US$200bn.
In retaliation, the EU filed a counter-suit, arguing that Boeing had received US$23bn in “trade-distorting” subsidies in the United States, mostly for research and development programs.
Both the US and the EU have won their WTO cases against each other’s unfair subsidies to their national champions, and the WTO has given its blessing to their retaliatory steps. In 2019, Washington slapped retaliatory tariffs on EU exports to the US worth US$7.5bn. The European Union did the same on $4bn in US exports in November 2020.
As the European Union is going forward with a bilateral investment treaty with China despite the POTUS team’s expressed misgivings, the WTO has been unable to approve a new global airplane subsidy code due to the Boeing-Airbus conflict. As noted by the Peterson Institute for International Economics, if the United States and the European Union could put their differences aside, they set back any unfair competition by Comac.
Further Comments from the EU Trade Commissioner
Vladis Dombrovskis said, “We have proposed suspending all mutual tariffs for six months in order to reach a negotiated solution, and create a necessary breathing space for industries and workers on both sides of the Atlantic,”
At the same time, the EU Commissioner said that the EU will closely scrutinize the new US law ‘Buy American’, which stipulates that public contracts may be exclusively awarded to American providers. During the interview, he also added that the EU scope “is to push for procurement markets that are as open as possible all over the world.”
In the end, with both Europe and the United States in the midst of pandemic-related recessions, resolving the Boeing-Airbus feud could help to revive the aircraft industry, generate employment, and even boost tourism.
Featured image: Boeing 777 N779XX – Photo ; Ryan Scottini/Airways