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US and EU agree to suspend feud over aid for Airbus and Boeing

President Biden, seen with European Council President Charles Michel (right) and European Commission President Ursula von der Leyen, in Brussels Tuesday, announced the end of a 17-year dispute with the European Union over aircraft subsidies for Boeing and Airbus.
President Biden, seen with European Council President Charles Michel (right) and European Commission President Ursula von der Leyen, in Brussels Tuesday, announced the end of a 17-year dispute with the European Union over aircraft subsidies for Boeing and Airbus.Doug Mills/NYT

BRUSSELS — President Biden on Tuesday announced the end of a bitter, 17-year dispute with the European Union over aircraft subsidies for Boeing and Airbus, suspending the threat of billions of dollars in punitive tariffs on each other’s economies for five years and shifting their focus to China’s growing ambitions in the aircraft industry.

The breakthrough came as Biden met top European leaders in a US-EU summit meeting. European officials said that two days of negotiations in Brussels between Katherine Tai, the US trade representative, and Valdis Dombrovskis, the EU trade commissioner, had finally produced an agreement that member countries approved overnight.

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“This really opens a new chapter in our relationship because we move from litigation to cooperation on aircraft — after 17 years of dispute,” said European Commission President Ursula von der Leyen.

Biden told her and Charles Michel, president of the European Council, that the world had changed and that the European Union and the United States working together was “the best answer to deal with these changes” that had brought “great anxiety” to citizens.

“It’s overwhelmingly in the interest of the USA to have a great relationship with NATO and the EU,” Biden said.

After the meeting, Biden flew to Geneva, where he will meet President Vladimir Putin of Russia on Wednesday. Biden will be able to present himself there as the leader of the Western democracies, having first been to summit meetings of the Group of 7, NATO and now the European Union, where he has consulted extensively with allies.

At these meetings, he said, “I’ve been making the case that the US and Europe — and democracies everywhere — are stronger when we work together to advance our shared values like fair competition and transparency,” Biden said in a statement. “Today’s announcement demonstrates exactly how that can work in practice.”

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In a briefing for reporters on the aircraft deal, Tai said that both sides had agreed to extend a suspension of tariffs for another five years while working together to counter China’s investment in the aircraft sector, especially from state-run companies.

China’s state-sponsored aerospace manufacturer, Commercial Aircraft Corp. of China, completed the first public flight test of its passenger airliner in 2017, and is fast becoming a rival to both Boeing and Airbus in global aircraft construction. Also, China’s airlines are state-run, and Beijing can order them to buy domestically built planes, squeezing market share for Boeing and Airbus.

The United States and the European Union would work together, Tai said, “to challenge and counter China’s nonmarket practices in this sector in specific ways that reflect our standards for fair competition.”

In a post-summit news conference, Tai explained: “For almost 20 years we have been at each other’s throats, fighting each other in terms of competition between our industries. While we have been engaged in this fight, others are taking the opportunity to launch their own industries, and we have been too busy fighting each other to pay attention.”

But she cautioned that the agreement set limits on the subsidies that the European Union would be allowed to provide to Airbus, warning that the United States would reimpose billions of dollars in tariffs if subsidies by European Union countries crossed a “red line.”

“These tariffs will remain suspended, so long as EU support for Airbus is consistent with the terms of this agreement,” she said. “Should EU support cross the red line, and US producers are not able to compete fairly and on a level playing field, the United States retains the flexibility to reactivate the tariffs.”

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The agreement means that significant punitive tariffs estimated at $11.5 billion, on a wide range of products including wine, tractors, spirits, molasses, and cheese, will continue to be suspended after both sides had agreed to do so in March while they tried to settle the dispute.

The dispute between Airbus and Boeing over illegal state subsidies goes back nearly two decades. In 2019, the World Trade Organization ruled that the European Union had illegally provided support to Airbus, clearing the way for Washington to respond with tariffs worth up to $7.5 billion in annual trade.

About a year later, in a parallel case, it ruled that the US benefits to Boeing also violated trade rules, authorizing Brussels to hit the United States with annual tariffs worth roughly $4 billion.

The agreement comes at a critical moment for both companies, which are struggling to overcome a slowdown caused by the pandemic. Most within the industry expect it to be years before airlines and plane manufacturers can fully shake off the effects of the downturn.

Both sides had already begun unwinding the subsidies, with Washington repealing a state tax break for Boeing last year, while Airbus had said that it would increase repayments of low-cost loans it received from multiple EU countries. Airplane purchases often take years to come together, and most airlines stick with one manufacturer to minimize pilot training and airplane maintenance costs. Still, the agreement removes a concern for both companies as they seek to boost sales around the world.

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Tai described the new agreement as part of Biden’s effort to conduct what he has called “a foreign policy for the middle class.” She said resolving the dispute would protect 1.2 million jobs in the aerospace sector and related industries.