U.S. and EU Agree to Suspend Retaliatory Tariffs in Airbus-Boeing Dispute for 5 Years

Trade Update • JUNE 15, 2021

United States Trade U.S. Trade Representative Katherine Tai today announced that the United States and Europe have established a cooperative framework to address the long-running dispute over state subsidies for large civil aircraft manufacturers.

The World Trade Organization ruled last year the U.S. had the right to hit EU nations with $7.5 billion in tariffs because of Europe’s Airbus subsidies. The WTO also ruled that the EU could, in turn, hit the U.S. with $4 billion in tariffs to punish the U.S. for having subsidized Boeing.

In a statement, Tai said the administration’s goal was “to forge a new, cooperative relationship in this sector so that our companies and our workers can compete on a more level playing field.” The agreement also includes a commitment for concrete, joint collaboration to confront the threat from China’s non-market practices.

“After years of bitter litigation and weeks of intense diplomacy, we have reached a deal on a set of high-level principles that resets U.S.-EU engagement in the large civil aircraft industry,” said Ambassador Katherine Tai.”

This latest announcement follows the March 2021 temporary suspension of retaliatory tariffs by each side in order to seek a “comprehensive and durable negotiated solution to the Aircraft disputes.”

Key Points of the Cooperative Framework

The cooperative framework outlined by the U.S. and EU includes:

• Suspending current WTO-approved retaliatory tariffs for five years, with the expectation that the U.S. and EU “will contribute to establishing a level playing field and to addressing shared challenges from non-market economies.”
• A Working Group on large civil aircraft led by each side’s top trade official that will meet on request or at least every six months (higher-level trade ministers will meet annually). The Working Group will address any disagreements that may arise and will collaborate on and continue discussing and developing the principles reached in the framework agreement.
• Each side providing “financing to its LCA [large civil aircraft] producer for the production or development of large civil aircraft on market terms.”
• Each side providing “funding for research and development for large civil aircraft to its LCA producer through an open and transparent process and to make the results of fully government funded R&D widely available, to the extent permitted by law. Each side intends not to provide R&D funding or other support that is specific, to its LCA producer in a way that would cause negative effects to the other side.”
• Each side intending “to collaborate on jointly analyzing and addressing non-market practices of third parties that may harm their respective large civil aircraft industries.” To that end, the framework agreement has an annex regarding cooperation on non-market economies so that the U.S. and EU can share information and more effectively address challenges posed by non-market economies, specifically China.

“Towards a Renewed Transatlantic Partnership”

In a joint statement following a meeting this week between President Joe Biden and the European Commission President Ursula von der Leyen in Brussels, the two sides said they “are committed to make this framework work to promote a level playing field, overcome long-standing differences, avoid future litigation, and more effectively address the challenge posed by non-market economies.”