US and EU agree truce over Airbus-Boeing subsidy tariff row

The United States and the European Union have agreed a truce in their near 17-year conflict over aircraft subsidies, suspending for five years one set of Trump-era tariffs which had soured relations between them.

The two sides have been battling since 2004 in parallel cases at the World Trade Organisation over subsidies for US planemaker Boeing and European rival Airbus, which each argued exposed the other to unfair competition.

They agreed in March to a four-month suspension of tariffs on $11.5 billion of goods from EU cheese and wine to US tobacco and spirits, which the WTO had sanctioned. Businesses have so far paid more than $3.3 billion in duties.

On Tuesday they said they would suspend the tariffs for five years, in line with a Reuters report on Monday, while still working on the overarching agreement on subsidies they had envisaged in March.

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Trans-Atlantic trade

The agreement is seen as a positive sign for transatlantic trade relations, turning a page on the more difficult Trump era. Irish exports got caught up in the fallout of the aircraft dispute, which saw a 25 per cent tariff slapped on goods including liqueurs, whiskey, butter and cheese.

Imports into Ireland were also hit with reciprocal tariffs on animal feed that hit beef, pork and poultry sectors.

These were among the tariffs that were suspended temporarily earlier this year as the Biden administration sought to reset relations and the deal has raised hopes of a permanent solution.

‘Today’s deal is a very good sign for transatlantic relations and will provide some certainty and relief to Irish exporters and importers,” said Fine Gael MEP Colm Markey.

“These punitive tariffs only served to damage our respective economies but now there is time and space to find a lasting solution,” the Midlands North West representative said.

“Today’s agreement marks the start of a new era of co-operation between the European Union and the United States.”

‘Major confidence boost’

"Grounding the Airbus-Boeing dispute delivers a major confidence boost for EU-US relations," EU trade chief Valdis Dombrovskis told a news conference after an EU-US summit with US president Joe Biden.

US trade representative Katherine Tai said the two sides had agreed to clear statements on what support could be given to large civil aircraft producers. They would also work to counter investments in aircraft by "non-market actors", she said, referring specifically to China.

Others were launching their own industries and the United States and the EU had been too busy fighting each other to pay attention, she said.

“The deal...includes a commitment for concrete joint collaboration to confront the threat from China’s ambitions to build an aircraft sector on non-market practices,” she said.

Both sides said they were confident the Airbus/Boeing dispute would indeed end within five years.

The United States and the European Union have agreed to set up a working group on the issue, provide financing on market terms, be transparent on R&D funding, avoid support that would harm the other side and cooperate to address “non-market practices” elsewhere.

Airbus said the deal levelled the playing field and ended “lose-lose” tariffs, which had also been imposed on planes. Boeing said the understanding committed the EU to address launch aid.

Biden welcomed the “major breakthrough”, as did ministers of France and Germany, both with Airbus facilities. WTO director-general Ngozi Okonjo said she was delighted the two sides had shown seemingly intractable problems could be resolved.

Shares of Airbus and Boeing traded slightly higher on the day.

Steel disputes

Former EU member Britain, which was also involved in the dispute as a home to Airbus production, said it hoped for a similar deal within days. Tai is due to meet her British counterpart Liz Truss on Wednesday.

The EU-US agreement removes one of two major trade irritants left over from Mr Trump’s presidency, the other being tariffs imposed on grounds of national security on EU steel and aluminium imports.

The European Commission, which oversees EU trade policy, last month suspended for up to six months a threatened June 1st doubling of retaliatory tariffs on Harley-Davidson motorbikes, US whiskey and motorboats, and refrained from slapping tariffs on more US products from lipstick to sports shoes.

Brussels and Washington have said they would seek to address excess global steel capacity largely centred in China.

The United States may find it tougher to remove the metals tariffs, which also apply to other countries such as China, because they are still backed by many US metal producers and workers.

‘Robust’ discussion

An EU official said the two sides had a “robust” discussion on metals, with disagreement on the rationale for the tariffs. The EU hopes to resolve the issue by December.

Brussels is also pushing what it dubs a new “positive agenda” on trade with Washington, including forging an alliance to drive WTO reform.

The two also agreed to co-operate on trade and technology, such as for setting compatible standards and facilitating trade in artificial intelligence.– Additional reporting Reuters