USA and Europe argue over Boeing-Airbus dispute

USA and Europe argue over Boeing-Airbus dispute
USA and Europe argue over Boeing-Airbus dispute
The United States and the European Union appear to be strengthening their positions ahead of future negotiations to settle a 16-year-old dispute over government subsidies to Boeing and Airbus.

US President Donald has reacted strongly to a decision by the World Trade Organization (WTO) that has given the European Commission (EC) the green light to impose around $ 4 billion in counter-tariffs annually on imported US goods, including Boeing aircraft. The decision revealed that illegal subsidies cost Boeing Airbus $ 4 billion annually in lost revenue and market share.

This follows a similar WTO ruling last year that gave the green light to US tariffs of $ 7.5 billion a year on European imports affecting aircraft parts and luxury goods through state aid support to Airbus. The transatlantic dispute that began in 2004 when the US asked the WTO to decide on subsidies from the Airbus government is the longest in the organisation’s 25-year history and has cost an estimated US $ 100 million to date.

The WTO ruling means that European airlines importing Boeing jets would have to pay tariffs expected to equal 15% of US border taxes on imports of Airbus jets. Boeing’s main European customer, Ryanair (FR, Dublin International), has asked the manufacturer to pay the tariffs and is expected to use this as a lever in negotiations to buy more of the grounded B737-8, according to Reuters. Chief Executive Officer Michael O’Leary said earlier this year the airline was in “advanced talks” with Boeing about an existing order for 135 of this type and a possible follow-up contract for the larger version of the aircraft.

While both sides were in a “checkmate” position, analysts and stakeholders on both sides expressed the hope that this could finally create the conditions for a negotiated solution between the US and Europe, especially at a time when the COVID-19 die Pandemic has devastated the global economy, with the aviation sector being one of the hardest hit.

In one stance, however, on October 15, 2020, Trump warned of a backlash by the US if the EU were to introduce the taxes. “If they hit back, we’ll hit much harder than them. You don’t want to do anything. I can tell you that, ”he told reporters. The chairman of the EU’s International Trade Committee, Bernd Lange, called for a negotiated solution, but warned the EU against continuing the tariffs without “constructive” engagement by the US.

Lange said in a statement following the verdict, “I sincerely hope that this decision will serve as an incentive to resolve these disputes through a negotiated settlement. This should remain the top priority because in times like these we should do more than work together and not against each other. That is why I call on both sides to start negotiations to reach a long-term agreement on subsidies for civil aircraft. ”

In a statement, Airbus said it fully supported the EC in taking the necessary measures to “create a level playing field and reach a long overdue deal”. “Airbus has not started this WTO dispute and we do not want to continue the harm to customers and suppliers in the aviation industry and to any other affected sectors,” said Guillaume Faury, Chief Executive Officer. “As we have already shown, we are still ready to support a negotiation process that will lead to a fair solution. The WTO has now spoken, the EU can implement its countermeasures. It is now time to find a solution so that tariffs can be removed on both sides of the Atlantic. ”

Commissioner Valdis Dombrovskis said the EU would “very much prefer not to collect tariffs” and urged US sales representative Robert Lighthizer to lift the Airbus-related sanctions.

Reuters reported that the two sides were communicating and the EC confirmed that it had received a US response to its own July proposal to end the dispute. Lighthizer reportedly proposed to Airbus repay US $ 10 billion in aid, which was seen as unacceptable to the EU at a time when aircraft manufacturers were looking for funds to weather the COVID-19 crisis.

Analysts said it should be possible to reach an agreement. Washington State has canceled an aerospace tax break that Boeing benefited from. For its part, Airbus has agreed to change the terms of the refundable jump-start aid granted by France and Spain for the development of the A350 aircraft. The European Commission said the changes meant the bloc fully complied with WTO rulings in the dispute and that the US had no reason to maintain its countermeasures against EU exports.

However, the series of subsidies is just one element of general trade tensions between the US and the EU that could delay an agreement. Analysts said the WTO decision could exacerbate trade tensions just three weeks before the US presidential election, but believed there was little chance the EU would decide anything by then as the outcome could change the transatlantic context, Market reported Watch.

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