The EU and US have agreed to suspend punitive tariffs related to their longstanding feud over aircraft subsidies, in the first breakthrough in trade relations since President Joe Biden took office.
The two sides reached a deal after intensive talks, according to people familiar with the discussions, in a sign that the 16-year-old transatlantic trade battle over state aid to Airbus and Boeing could be coming to an end.
The accord, announced by Ursula von der Leyen, European Commission president, means both sides will suspend tariffs linked to the dispute for four months. The duties have hit products ranging far beyond aircraft, encompassing an eclectic array of goods such as US self-propelled shovel loaders, French wine and even US ornamental fish.
In a statement issued after a call with Biden, von der Leyen said: “President Biden and I agreed to suspend all our tariffs imposed in the context of the Airbus-Boeing disputes, both on aircraft and non-aircraft products, for an initial period of four months.
“We both committed to focus on resolving our aircraft disputes, based on the work of our respective trade representatives,” she said.
The goodwill gesture is intended to prepare the ground for negotiations on a permanent solution to the dispute by setting joint rules on permissible aircraft subsidies.
The US trade representative’s office said that a settlement was needed to address challenges posed by new entrants to the aircraft sector from China. Beijing has made it a priority to break the global duopoly that has dominated for decades.
It added that limits on future subsidies and monitoring and enforcement mechanisms would be part of a deal between the EU and US.
A European official said the announcement came “earlier than expected”, given that Biden’s nominated trade representative Katherine Tai has yet to be confirmed. Countering China and setting transatlantic standards for the aircraft industry were keys goal, the official said.
One European diplomat said that four months would be “enough time to focus minds while still being very do-able”.
The deal came a day after the UK and US came to their own arrangement whereby Washington also agreed to suspend punitive tariffs linked to the dispute for four months.
The UK had already unilaterally stopped imposing its own tariffs at the start of this year. EU officials and other trade experts have questioned whether the UK would have had the right to continue to impose them anyway, given its exit from the bloc’s customs union.
Brussels imposed extra tariffs on $4bn of US goods in November, covering a wide range of products including sugarcane molasses, casino tables and fitness machines.
By then the US had already imposed extra duties on $7.5bn of European exports — the result of Washington’s own World Trade Organization victory against aid to Airbus.
Brussels sees today’s step as a breakthrough that can pave the way for broader co-operation on trade after the tensions of the Trump era — tensions that at times threatened to boil over into a full-scale trade war.
The US-EU aircraft subsidies dispute is one of the longest-running cases in WTO history. Both sides have been found over the years to have failed to properly implement WTO panel rulings on illegal subsides.
The battle dates back to 2004, the year after Airbus overtook its US rival in terms of deliveries for the first time. Having earlier brokered an agreement with the EU on state aid in 1992, the US launched a case against subsidies for the European group that dated back to the 1970s. Initially the US claimed that $22bn in illegal funding had been given to Airbus.
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The EU followed up a few months later with a challenge of its own, originally claiming $23bn in illegal aid was offered to Boeing.
The two sides have long remained far apart on the terms of any agreement on how to fund new aircraft development. But with both Airbus and Boeing focused on recovering after the coronavirus pandemic and a hiatus in new commercial aircraft development, industry experts said the timing was right.
The deal will come as a relief to aircraft manufacturers and other businesses on both sides of the Atlantic. French wine producers and Italian cheesemakers have been among those in the vanguard of calls for an end to the dispute. The spirits industry has also been among the US sectors strongly urging a solution.
Airbus welcomed the decision to suspend tariffs. The company said it supports “all necessary actions to create a level-playing field and continues to support a negotiated settlement of this longstanding dispute to avoid lose-lose tariffs”.
Boeing said it hopes the deal would allow for talks to “bring a level playing field to this industry”.