Hailed as a “new chapter” in bilateral trade relations between the United States and the European Union (EU), the two sides ad At a US-EU summit in Brussels on Tuesday, an agreement was reached to suspend (for five years) all tariffs resulting from the long-standing transatlantic dispute over aircraft subsidies. A almost identical case was then concluded between the United States and the United Kingdom (which now operates independently after Brexit) a day later.
These suspensions will impact a wide range of products originating in the United States and the EU previously subject to ad valorem duties ranging from 15% to 25%.
As detailed in our previous customer alert, this dispute dates back to 2004, when the United States filed a complaint with the World Trade Organization (WTO) alleging that Airbus SE had received $ 22 billion in banned government subsidies. A year later, following the failure of consultations with the United States and their request for the establishment of a dispute settlement panel in the Airbus case, the EU (including the United Kingdom was a member) responded by filing its own complaint with the WTO, alleging that Boeing, a direct competitor of Airbus, had received $ 23 billion in government subsidies.
During nearly two decades of ongoing dispute settlement, the WTO has allowed both sides to collect tariffs leading to retaliation in progress between business partners.
Europe and Biden administration celebrate mended relationship
As stated in our customer alert published on March 5, 2021, the US and EU laid the groundwork for a long-term deal in announce a four-month tariff suspension resulting from the subsidy dispute (one day after a identical ad between the United States and the United Kingdom).
For many, this week’s suspension announcements are the culmination of European leaders’ long-held hopes that the Biden administration would ease bilateral trade tensions that have recently strained transatlantic trade relations, as the report predicts. of the European Commission. policy document published in December 2020 under the title âA New EU-US Agenda for Global Changeâ.
President Joe Biden echoed these general sentiments, saying Tuesday at the start of meetings with EU leaders that “it is in the immense interest of the United States of America to have an excellent relationship with NATO and the EU â. European Commission President Ursula von der Leyen, for her part, called the agreement a “breakthrough” which “opens a new chapter” in US-European relations. Likewise, with regard to the separate agreement between the United States and the United Kingdom, the British Minister for International Trade, Liz Truss, noted that the suspension will allow the two countries to raise their trade relations to the “level. superior “, while adding that it will allow the American-European allies to” work “. up close to challenge the unfair practices of countries like China and use the power of free trade to better rebuild after the pandemic. “
As noted above, the five-year suspension will impact a wide range of products previously subject to ad valorem duties ranging from 15% to 25%, including, but not limited to, food products, beverages, polymers, suitcases and handbags, exercise equipment and loader / tractor excavators of the on the American side, and cashmere, pork products, cheese, alcoholic beverages and machinery on the European side.
What is the next step for US-European trade relations?
Despite the short-term implications of the tariff suspension of aircraft subsidies, commentators were quick to point out that the United States and Europe have yet to agree on acceptable limits of public support for Boeing and Airbus. Notably, each suspension agreement commits to establishing a large civil aircraft working group (a US-UK task force and a US-EU taskforce) with the aim of negotiating a level State support measures for aircraft that are acceptable to both, particularly in light of new entrants to the aircraft market from so-called ânon-marketâ economies such as China.
The suspensions also leave many lingering transatlantic trade issues on the table, including the controversial steel and aluminum tariffs (Section 232 tariffs) instituted under the Trump administration and pursued by the Biden administration. To this end, however, the US and the EU have issued a joint statement on trade which includes a commitment for both parties to “initiate discussions to enable the resolution of existing disputes over steel and aluminum measures before the end of the year” and to “ensure long-term viability. term of our steel and aluminum industries, and to address excess capacity. This stated commitment to resolve Section 232 tariff issues was preceded by the recent EU decision. suspension of plans to impose retaliatory tariffs on American products in the hope of reaching such a deal.
Finally, as far as the UK is concerned, the suspension agreement may prove to be a crucial step towards progress in the broader Free Trade Agreement (FTA) negotiations between the United States and the United States. UK. The FTA is seen by the UK government as one of the biggest potential benefits of UK leaving the EU. However, so far, the Biden administration has slowed down a US-UK FTA, as it continues to focus on national priorities, especially when it comes to strategic competition with China.