EU-US dispute over civil aircraft subsidies

EU-US dispute over civil aircraft subsidies

Since the 1980s onset of intensified sales competition between American and European civil aircraft manufacturers, aircraft trade has been a point of contention in transatlantic trade. In a briefing to Members of the European Parliament the Parliament Research Services prepared a briefing on the EU-US dispute over civil aircraft subsidies.

Between 1992 and 2004, the Bilateral Agreement on Trade in Large Civil Aircraft regulated the permitted levels of support to aircraft manufacturers. In 2003, Europe’s Airbus sold more large civil aircraft than United States-owned Boeing for the first time. The following year, the USA renounced the agreement and launched a World Trade Organization (WTO) case over State aid given to Airbus. The European Union filed a parallel case against US subsidies to Boeing. Following a long-standing dispute, the WTO authorised US imposition of countermeasures worth nearly US$7.5 billion in 2019. In October 2020, in a mirror case brought by the EU against the US subsidies to Boeing, the EU was authorised to impose retaliatory tariffs. On 9 November, the EU imposed these tariffs, on US$4billion worth of US aircraft, food and drink production.

In addition to the tariffs, the aviation industry has been hard-hit by the coronavirus crisis. Joe Biden’s success in the recent Presidential election strengthen hopes for a negotiated solution to the dispute.

In November 2019, the Parliament adopted a resolution calling for a unified EU response to the tariffs, and swift support for agriculture and food sectors. The International Trade Committee (INTA) called for a negotiated solution and condemned the US blockage of nominations to the Appellate Body, which jeopardises arbitration in the multilateral trading system.

In October 2020, the WTO published a decision by the arbitrator on EU retaliation over WTO non-compliant subsidisation of Boeing, allowing the EU to impose tariffs on nearly US$4 billion worth of US goods per year. Commissioner for Trade Valdis Dombrovskis has stated repeatedly that the EU would prefer a negotiated solution. The German Minister of Economy Peter Altmaier was in favour of a delay or avoiding the imposition of the tariffs, in particular due to the difficult economic situation in the context of the coronavirus pandemic. The French Minister of Economy Bruno LeMaire underlined the need for EU imposition of tariffs in the absence of a negotiated solution with the USA.

On 9 November 2020, after the US elections, the European Commission imposed tariffs on a selection of US$4billion worth of goods, drawn up following a public consultation. The tariffs reflect the US countermeasures and consist of a 15 % duty on US aircraft and 25 % duties on agricultural and industrial products. Commission Vice-President Dombrovskis has indicated that if the US removes the tariffs with immediate effect, the EU will also do so.

The United States Trade Representative (USTR) expressed disappointment over EU countermeasures and stated that the US is seeking to negotiate with the EU. The November 2020 election result increased hopes that the conflict can be resolved. While President Trump was strongly in favour of escalating tariffs in the case of EU retaliation, Joe Biden has indicated his commitment to revitalising the transatlantic trade partnership.

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