EU & US to suspend tariffs in long-running Airbus-Boeing feud

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The EU and US have agreed to a four-month suspension of punitive tariffs imposed as part of the long-running feud over aircraft subsidies.

The move is being hailed as a breakthrough in the 16-year-old battle over state subsidies to Airbus and Boeing, and the first sign that transatlantic trade relations are warming since President Joe Biden took office. 

The deal was announced by European Commission President Ursula von der Leyen in a statement following a call with the US President. 

Read more: $4bn EU tariffs on US products to come into effect

"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," the statement said.

"We both committed to focus on resolving our aircraft disputes, based on the work our respective trade representatives."

Duties imposed as part of the dispute have been wide-ranging and punitive, covering an array of products well-beyond the aerospace sector such as French wine, and US ornamental fish.

Intended more of a symbolic gesture of goodwill, the announcement was intended to pave the way for negotiations for a permanent solution by setting joint rules on acceptable aircraft subsidies.

The US trade representative's office said that a permanent agreement was necessary to deal with challenges posed by new and rising players in the aircraft sector, predominantly China. One of Beijing's long-running priorities has been to break the transatlantic duopoly that has dominated the sector for decades.

It added that any deal between the US and EU would include limits on future subsidies and accompanying enforcement mechanisms.

The announcement was made one day after a similar arrangement was reached between the US and UK whereby Washington agreed to suspend tariffs linked to the dispute.

Read more: US Suspends Tariffs On UK In Airbus-Boeing Dispute

The UK had already unilaterally stopped tariffs at the start of the year. Officials had been questioning whether or not it would have been legal for the country to continue with tariffs given its exit from the European single market.

In November, Brussels imposed extra tariffs on $4 billion of US products such as fitness machines, casino tables and sugarcane molasses.

At that point, the US had imposed tariffs on $7.5 billion of European goods as a result of a WTO ruling on the bloc's subsidies to Airbus.

Brussels will see the suspension as a sign that relations with Washington are beginning to normalise following the tensions of the Trump era, which at times seemed ready to spill over into a full-scale trade war.

The Airbus-Boeing dispute is one of the longest-running cases in WTO history and both sides have been found to have properly adhered to WTO rulings on illegal subsidies.

The feud began in 2004, a year after Airbus overtook Boeing in terms of delivery numbers for the first time. The US made the case that an earlier agreement with the EU on state aid, which was brokered in 1992, had been breached, claiming that Airbus received $22 billion in illegal funding.

A few months later, Brussels retaliated with a legal challenge of its own, arguing that $23 billion had been given to Boeing.

Since then, both sides have remained far apart on the terms of any agreement on how to fund new the development of new aircraft.

With both Airbus and Boeing focused on recovering from the effects of the coronavirus pandemic and a hiatus in new commercial aircraft development, industry experts said the timing was right.

Read more: France calls for the end of US-EU trade dispute

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 the loudest voices calling 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."

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