‘Ceasefire’ reached in EU-US aircraft subsidy war

Sunday, 2021-03-07 11:25:26
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The EU and the US have reached a truce in their 16-year-old dispute over subsidies for rival aircraft manufacturers Boeing and Airbus.
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NDO – Over the weekend, the European Union (EU) and the United States (US) announced a truce in a longstanding dispute over subsidies for the world’s biggest aircraft manufacturers, Airbus (EU) and Boeing (US).

The move has eased difficulties for the plane makers, which have been suffering significantly from the COVID-19 pandemic, and shows that transatlantic trade tensions have begun to cool down.

The US and the EU have imposed tit-for-tat tariffs in the 16-year-old dispute over their governments’ subsidies for European aircraft maker Airbus and US rival Boeing. Accordingly, the US levied a 15% duty on imported Airbus planes from 2019 after the years-long dispute forced the two sides to submit the case to the World Trade Organisation (WTO). After that, the EU retaliated against the US with a similar tax rate on Boeing planes. The “tariff war” between the two sides also spread to wine, whiskey and other goods.

However, President of the European Commission (EC) Ursula von der Leyen recently announced that the EU and the US have agreed to temporarily cease retaliatory tariffs regarding the Airbus-Boeing dispute for four months.

The decision by leaders on the two coasts of the Atlantic Ocean to stop tit-for-tat tariffs on airplanes and other commodities has also helped to alleviate difficulties facing aircraft manufacturers in the context of the pandemic. At the end of February, CEO of European aircraft manufacturer Guillaume Faury called on the two sides to stop imposing retaliatory tariffs, stating that the EU-US “tax war” has exacerbated the losses caused by the COVID-19 crisis on both sides. Airbus statistics showed that the company posted a net loss of US$1.3 billion in 2020, while Boeing also experienced disappointing business results with total damages of up to US$11.9 billion last year.

According to analysts, the EU-US “truce” in the aircraft subsidy war shows that after the US has a new president, tensions in the transatlantic trade relations have begun to cool down. The US-EU trade ties constantly plummeted under former US President Donald Trump’s administration, with Washington imposing tariffs on US$7.5 billion of EU exports.

In reply, the EU levied tariffs on US$4 billion of goods imported from the US. Therefore, European leaders have responded positively to the aforementioned “ceasefire” between the two sides. Over the weekend, the French commerce ministry welcomed the EU-US agreement, hailing it as the first step in the process of de-escalation. EU member states will consider introducing new regulations on public subsidies for the aerospace sector.

In the context of the US facing unprecedented severe challenges and the EU struggling to overcome the economic and pandemic crisis, the cooling down of trade tensions between the two sides is significant to the promotion of regional and global economic recovery. In addition, the suspension of tit-for-tat tariff imposition also paves the way for the US and EU to restore and develop many other global cooperation contents on security and climate change response, which had been stagnated or interrupted during the term of former US President Donald Trump.