Subsidy tensions remain despite Airbus-Boeing deal
The deal the United States and the European Union reached Tuesday to end their long-running rift over subsidies to Boeing and Airbus will suspend billions in punitive tariffs. It will ease trans-Atlantic tensions. And it will let the two sides focus on a common economic threat: China.
But the breakthrough still leaves some trade friction between the U.S. and the EU unresolved. Most prominently, President Biden kept in place import taxes that President Donald Trump imposed on European steel and aluminum, a move that infuriated some of America’s closet allies three years ago.
For now, Tuesday’s truce in the Boeing-Airbus dispute goes a long way toward repairing a huge commercial relationship — $933 billion in two-way trade last year despite the pandemic — that came under enormous strain during the Trump years. Among other things, the former president angrily charged the Europeans with using unfair trade practices to sell more products to 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 aviation conflict. Since 2004, the U.S. and the EU have accused each other of unfairly subsidizing their aircraft-building giants — America’s Boeing and Europe’s Airbus. Over the past two years, the World Trade Organization, which adjudicates such disputes, declared both sides guilty. It allowed the United
States to impose up to $7.5 billion in tariffs and the EU up to $4 billion’ worth.
The tit-for-tat duties victimized companies that have nothing to do with aircraft production, from French winemakers and German cookie bakers in Europe to spirits producers in the United States, among many others. Tuesday’s agreement brought a measure of relief to companies on both sides of the Atlantic.
“For about 20 years, we have been at each other’s throat,” U.S. Trade Representative Katherine Tai said. “We have been too busy fighting each other.’’
In March, weeks after Biden took office, the two sides agreed to suspend the tariffs. That suspension, which began March 11, was to last for four months. The agreement announced Tuesday will officially take effect July 11 and will put the tariffs on hold for five years.
“It’s obviously a good sign — they agreed to something,” said William Reinsch, a former U.S. 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 sanity” to trans-Atlantic trade.
But Reinsch notes that the two sides “kind of kicked the can down the road,” by leaving unsettled some issues in the aircraft dispute, such as whether Airbus must repay the government subsidies it received over the years. Instead, the U.S. said in a fact sheet, the two sides had agreed to establish a group “to analyze and overcome any disagreements that may arise.’’
The deal might help solidify the duopoly of Airbus and Boeing, which together dominate the global market for airline jets. Both companies have struggled recently with declining orders and deliveries at a time when the pandemic devastated air travel and led airlines to cancel or delay purchases.
Tuesday’s agreement made clear that the United States and the EU recognize that Boeing and Airbus face an external threat far bigger than each other: As part of its aggressive drive to become the world’s dominant industrial power, China is intent on developing its own plane-making industry with heavy government support.
“It will be a classic Chinese game plan,” Reinsch said. The government in Beijing will “force all the Chinese airlines to buy theirs. They’ll create a market. Their planes will get better, and once they’ve gotten better and cheaper, they’ll start flooding the global market.”
The U.S. and EU have agreed to work together to counter Beijing’s efforts to obtain foreign aviation technology. They plan to take joint action against unfair trade practices that appear intended to give Chinese plane manufacturers unfair advantages.
Richard Aboulafia, an aerospace analyst with Teal Group, suggested that the agreement will help the U.S. 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 manufacturer, COMAC.