BRUSSELS – The deal the United States and the European Union reached on Tuesday to end their long-standing disagreement over subsidies to Boeing and Airbus will suspend billions in punitive tariffs. It will ease transatlantic tensions. And it will allow both sides to focus on a common economic threat: China.
But the breakthrough still leaves some trade friction between the US and the EU unresolved. Most notably, President Biden kept in place the import taxes that President Donald Trump imposed on European steel and aluminum, a move that infuriated some of America’s most secretive allies he three years ago.
For now, Tuesday’s truce in the Boeing-Airbus dispute goes a long way to repairing a huge trade relationship – $ 933 billion in bilateral trade last year despite the pandemic – which has been strained for years. Trump. Among other things, the former president angrily accused Europeans of using unfair trade practices to sell more products in the United States than they bought and of shirking their responsibility to pay for their own national defense.
No trade dispute between the two sides has raged longer than their air dispute. Since 2004, the United States and the EU have accused each other of unfairly subsidizing their aircraft construction giants, the American Boeing and the European Airbus. Over the past two years, the World Trade Organization, which settles these disputes, has found both sides guilty. It has allowed the United States to impose tariffs of up to $ 7.5 billion and the EU up to $ 4 billion.
The tit-for-tat tariffs have victimized businesses that had nothing to do with aircraft production, from French winegrowers and German bakers in Europe to spirits producers in the United States, among others. Tuesday’s deal brought some relief to businesses on both sides of the Atlantic.
“For about 20 years, we’ve been holding each other by our throats,” said US Trade Representative Katherine Tai. “We’ve been too busy fighting each other.”
In March, weeks after Biden took office, the two sides agreed to suspend tariffs. This suspension, which began on March 11, was to last four months. The deal announced on Tuesday will officially come into effect on July 11 and suspend tariffs for five years.
“Obviously that’s a good sign – they’ve agreed on something,” said William Reinsch, a former US trade official who is now an analyst at the Center for Strategic and International Studies.
The truce, he said, will add “an element of certainty and common sense” to transatlantic trade.
But Reinsch notes that both sides “kind of kicked the box” by leaving some questions in the aircraft dispute unresolved, such as whether Airbus should repay government grants it has received. over the years. Instead, the United States said in a backgrounder that the two sides had agreed to create a group “to analyze and overcome any disagreement that may arise.”
The deal could help consolidate the duopoly of Airbus and Boeing, which together dominate the global airliner market. The two companies recently struggled with declining orders and deliveries as the pandemic devastated air travel and led airlines to cancel or delay purchases.
Tuesday’s deal made it clear that the US and the EU recognize that Boeing and Airbus face a far greater external threat than the other: as part of its aggressive campaign to become the powerhouse. The world’s dominant industrialist, China intends to develop its own aircraft manufacturing. industry with strong government support.
“It will be a classic Chinese game plan,” Reinsch said. The Beijing government “will force all Chinese airlines to buy theirs. They will create a market. Their planes will improve, and once they get better and cheaper, they will start flooding the world market.”
The United States and the EU have agreed to work together to counter Beijing’s efforts to obtain foreign aircraft technology. They plan to take joint action against unfair trade practices that appear intended to give unfair advantages to Chinese aircraft manufacturers.
Richard Aboulafia, aerospace analyst at Teal Group, suggested the deal will help the United States and Europe pivot to present a united front against China. He noted that Chinese airlines delayed deliveries from Boeing and Airbus during the pandemic but continued to take deliveries from China’s own aircraft maker, COMAC.
“The Chinese want to close their market and go their own way, and the biggest export market on the planet for Airbus and Boeing is disappearing,” Aboulafia said.
The deal between the US and the EU will not prevent China from doing so, he predicted, “but at least they can prevent a scenario in which China divides the West and rises states. -United and their allies against each other.
In another sign of transatlantic reconciliation, wealthy Group of Seven countries, including France, Germany, Italy and the UK, this month agreed to a proposal from the Biden administration for a minimum tax worldwide of 15% on the profits of multinational companies.
The idea is still far from materializing. But a global corporate tax could potentially resolve another dispute between Washington and Europe: Several European countries, frustrated that big tech companies are so adept at avoiding taxes, have imposed digital services taxes on US companies. such as Google and Apple.
Calling the taxes unfair, the United States prepared retaliatory tariffs. But a global tax rate that hits a wider range of multinationals could defuse the problem by increasing tax revenues without discriminating against American companies.
Washington and its European trading partners remain strongly at odds over Trump’s 2018 steel and aluminum tariffs. What Europeans have found particularly infuriating is the rationale for import taxes: Trump said that foreign metals were a threat to US national security, even though many of the countries hardest hit by the levies were US allies in NATO.
Moreover, the tariffs did not directly address the biggest problem steel and aluminum manufacturers face: The vast overproduction from China is keeping global metal prices lower than they would otherwise be.
Although he is committed to restoring relations with Europe, Biden has so far kept Trump tariffs in place. They are popular with American unions and metal manufacturers in the American Midwest, a politically crucial region for Biden and his Democratic Party.
Still, in a gesture of goodwill last month, the EU agreed to suspend tariff escalation plans against U.S. products in the metals dispute. And in a joint statement, the two sides said they would tackle the overproduction of steel and aluminum and “hold to account countries like China that support trade-distorting policies.”
“The answer is a global deal in which everyone forces the Chinese to eat their surplus steel and aluminum,” Reinsch said.
European Commission President Ursula von der Leyen has expressed cautious optimism that a deal on metals tariffs could be reached by the end of the year.