EU, U.S. Reach Deal on Airbus-Boeing Subsidy Dispute

 - June 15, 2021, 10:32 AM

The European Union and the U.S. have agreed to suspend the application of tariffs arising from the 17-year dispute over subsidies to Airbus and Boeing for five years while the sides formulate “a forward-looking, collaborative platform to address bilateral issues as well as global challenges,” the European Commission confirmed Tuesday. According to a written statement, the sides will collaborate on analyzing and addressing “non-market practices” of third parties that could harm their large civil aircraft industries.

“With this agreement, we are grounding the Airbus-Boeing dispute,” said European Commission executive vice-president Valdis Dombrovskis. “It proves that the transatlantic relationship is now moving to the next level and that we can work with the U.S. on tackling long-running disputes. We now have time and space to find a lasting solution through our new working group on aircraft, while saving billions of euros in duties for importers on both sides of the Atlantic.”

Apart from the five-year suspension of countermeasures, the EU and U.S. agreed to establish a working group on large civil aircraft led by each side's respective trade minister and commit to providing financing solely on so-called market terms. They also agreed to provide research and development funding through” an open and transparent process” and make the results of full government-funded R&D widely available. The agreement prohibits R&D funding and support such as specific tax breaks to producers that would harm the other side. Finally, the sides agreed to work together on addressing third-party practices that might harm their respective airliner manufacturing industries.

The longest-running subsidy case in history, the dispute started in 2004, when the U.S. filed a complaint with the  World Trade Organization (WTO) against the EU over illegal subsidies to Airbus. The EU then filed a case against the U.S. in May 2005 for what amounted to subsidies to Boeing.   

Following WTO decisions, the U.S. in October 2019 and the EU in November 2020 imposed punitive tariffs on each other's exports, including 15 percent duties on aircraft, affecting a total of $11.5 billion of trade between the two sides. As a result, EU and U.S. businesses have had to pay over $3.3 billion in duties, according to the European Commission. 

During an online press briefing held by Airbus early Tuesday, company chief commercial officer Christian Scherer welcomed the news out of Brussels on the subsidy settlement. “You don’t have to take that from Airbus as a fairly obvious statement to make,” he said. “Just ask our customers, ask the market whether airlines are in favor of tariffs here or there. Obviously, they’re not.”

Scherer also confirmed earlier reports that Airbus has begun studying the prospect of a freighter version of the A350, adding that the strength of the freighter market during the pandemic has “exacerbated” Airbus’s relative lack of presence in the segment. “What do we do when we realize something? Well, we react to it,” he said, adding that a launch would come when the company closes its business case.