US and EU end 17-year subsidy dispute

The United States (US) and the European union   (EU) have agreed to end a 17-year dispute over aircraft subsidies that had spilled over and led to billions of dollars of punitive tariffs targeting several areas of the two sides’ economies.

The Financial Times (FT) reported that two days of intensive negotiations in Brussels had led to a draft deal, with the breakthrough finalised on Tuesday at US president Joe Biden’s first EU-US summit meeting in Brussels.

EU sources said that European Commission executive vice-president Valdis Dombrovskis and US trade representative Katherine Tai had this week “reached an understanding relating to large civil aircraft, transforming almost 17 years of disputes into a forward-looking, collaborative platform to address bilateral issues as well as global challenges”.

The EU said both sides “will now seek to overcome long-standing differences in order to avoid future litigation and preserve a level playing field between our aircraft manufacturers and will also work to prevent new differences from arising”.

It said the EU and the US also “agreed to suspend application of harmful tariffs worth of US$11.5 billion for a period of five years that hurt companies and people on both sides of the Atlantic”.

The two sides also pledged to work together in “addressing non-market practices of third parties” — something officials said was a nod to concerns regarding China.

Although the dispute began in 2004, the disagreements escalated under the Trump administration and following a ruling in May 2018 by the WTO that allowed the US to take countermeasures against European exports worth up to US$7.5 billion – measures that the US imposed in October 2019. US countermeasures affected 19 different product categories, including aircraft, wines and spirits, dairy and cheese or machinery. Tariffs were 15% on aircraft and 25% non-aircraft products, and led to some US$2.2 billion in duties paid by US importers.

And then in March 2019, the EU imposed countermeasures on US$4 billion worth of US exports to the EU in November 2020. EU countermeasures affected 130 different product categories, including aircraft, nuts, tobacco, spirits, handbags or tractors. Tariffs were 15% on aircraft and 25% non-aircraft products, and led to some US$1.1 billion in duties paid by EU importers.

However, following the inauguration of a new US president this year, in March the EU and US agreed to suspend all retaliatory tariffs on EU and US exports imposed in the Airbus and Boeing disputes for a four-month period, to allow both sides to focus on resolving this long-running dispute. 

European Commission President Ursula von der Leyen said: “We have taken a major step in resolving the longest trade dispute in the history of the WTO. I am happy to see that after intensive work between the European Commission and the US administration, our transatlantic partnership is on its way to reaching cruising speed.

“This shows the new spirit of cooperation between the EU and the US and that we can solve the other issues to our mutual benefit. Together we can deliver for our citizens and businesses.”

European Commission Executive Vice-President Valdis Dombrovskis said: “With this agreement, we are grounding the Airbus-Boeing dispute. It proves that the transatlantic relationship is now moving to the next level, and that we can work with the US on tackling long-running disputes. We now have time and space to find a lasting solution through our new Working Group on Aircraft, while saving billions of euros in duties for importers on both sides of the Atlantic.”

Image: Alamy