Five year ‘truce’ agreed by the EU & US in Boeing-Airbus subsidies dispute

After a trade dispute of seventeen years which has seen retaliatory tariffs imposed upon each other’s imports, the United States and the European Union have agreed a five year moratorium on their long running conflict over aircraft subsidies to Boeing and Airbus.

The case, which is among the World Trade Organization's longest and most expensive dispute proceedings, dragged on so long that former Commerce Secretary Wilbur Ross declared the process “a joke” in 2018.

Both sides said they were confident the Airbus/Boeing dispute would indeed end within five years.

The United States and the European Union have agreed to set up a working group to agree how they will each provide financing on market terms, be transparent on R&D funding, avoid support that would harm the other side and cooperate to address "non-market practices" elsewhere, specifically China’s state-sponsored aerospace manufacturer Commercial Aircraft Corp., or Comac, which is on track to become a legitimate rival in global planemaking by the end of the decade.

Airbus said the deal levelled the playing field and ended "lose-lose" tariffs, which had also been imposed on planes. Boeing said the understanding committed the EU to address aircraft launch aid.

The feud dates back to 2004, when the U.S. lodged a legal case at the World Trade Organization against the EU over member-state support to Airbus for commercial aircraft development.

A parallel case opened by the EU argued that Boeing benefited from U.S. subsidies as well as space and military contracts, which defrayed the cost of civilian aircraft development.

In 2019, the World Trade Organization authorised the U.S. to level tariffs against $7.5 billion of EU exports annually over government support for Airbus which saw punitive tariffs levied on European food and luxury items, like Champagne, cognac and leather goods produced by LVMH Moet Hennessy Louis Vuitton, Givenchy, Hermes, Remy Cointreau and Pernod Ricard.

The EU retailited with levies on $4 billion of U.S. goods, like tractors, video games and rum produced by Caterpillar, Microsoft and Bacardi.

The long running dispute, while a boon to Geneva’s international trade lawyers, has been a significant flash point in transatlantic trade relations and cost businesses some $3.3bn in tariffs.

Cover photo by L.Filipe C.Sousa on Unsplash