EU Role in Confronting China Critical to Airbus-Boeing Settlement, Biden Administration Says

The Biden administration emphasized how reaching an agreement to end a 17-year-dispute over government subsidies to both Airbus and Boeing does more than just lift tariffs for at least five years. They see the most significant plank of the agreement as the one in which European Union countries agree to prevent foreign investments in the aerospace sector that are done to acquire technology or know-how, and to counter investments by European aerospace companies in China or other countries that are done in response to incentives or because the investments are a condition to sell in that market.

U.S. Trade Representative Katherine Tai, in a press conference June 15, emphasized how solving the dispute allows for joint collaboration "to confront the threat from China's ambitions to build an aircraft sector on non-market practices."

When asked if the EU and the U.S. would be trying to punish China for subsidizing its aircraft industry, Tai questioned the premise of the question. "I want to really challenge the premise that trade is about punishing anyone," she said, saying that trade is about championing our own economic interests, and cooperating with countries that share our interests.

In a press call with senior USTR officials, one said that permanently removing the 25% tariffs on 150 tariff lines from Europe, mostly European food and beverages, and 10% tariffs on Airbus planes is dependent on Europe following through on its commitments on China. "It doesn't seem like an inaccurate assessment to say we’re more forward-leaning on this than the EU, but we want to bring them along with us," a USTR official said. The official said that a five-year truce on tariffs is long enough to provide certainty for producers, but leaving open the option of tariffs returning is helpful for "motivating these conversations for ensuring they are productive."

The National Association of Beverage Importers, whose members have had to pay 25% more for many of the products they buy, said it will relieve importers and consumers of the financial burdens of the tariffs. The American Apparel and Footwear Association also hailed the end of additional tariffs on its members' European imports.

The agreement is light on details of how the U.S. will evaluate European ways of assisting Airbus that are detrimental to Boeing, and vice versa. The EU did say that any governmental financing for Airbus will be on market terms, and the U.S. said it would not provide specific tax breaks or R&D funding to Boeing that would harm Airbus. Tai said the lack of details is by design. In a joint press conference with the EU's trade minister, she said, "A process that requires 20 years to resolve a dispute is inherently problematic. [This] is an agreement that is not legalistic precisely in design, because we are converting a legalistic fighting relationship into one that is more agile, cooperative, and able to harness the political will to work together." The working group will meet on request, or at least every six months; the trade ministers will consult at least yearly.

A senior USTR official said that the conclusion of this dispute is an important step forward in the EU-U.S. relationship, "both how we think about the irritants between ourselves and how we address the rest of the world." She said that in the case of Section 232 tariffs on steel and aluminum, those are bound together in a more explicit way even than the aircraft subsidies dispute. "It’s a difficult issue to address steel overcapacity, and to think about how to effectively address it together but we think this is an important step in the relationship that can lead to greater collaboration," she said.

House Ways and Means Committee Chairman Richard Neal, D-Mass., also portrayed the advance as one that could help resolve the steel and aluminum tariffs. "This agreement creates an opportunity for the United States and the EU to work cooperatively to confront China’s non-market practices in the aerospace sector and beyond," he said. “Today’s announcement marks a critical, positive turning point in the U.S.-EU transatlantic relationship. I look forward to partnering with the Administration as it works to rebuild our alliances and tackle issues of common concern including forced labor, climate change, and unfair trading practices.”

The International Association of Machinists, the union that represents thousands of Boeing workers, said, "As thousands upon thousands of U.S. aerospace jobs are outsourced throughout the world to countries like Mexico and China, we are also heartened by an acknowledgement that at least one non-market economy, China, has become the focus of these talks."

World Trade Organization Director-General Ngozi Okonjo-Iweala said she was delighted to hear of the dispute's resolution. "This has been one of the longest running and most taxing disputes in the history of the WTO and the two sides have shown that even the most seemingly intractable differences can be resolved," she said.

House Ways and Means Trade Subcommittee Chairman Earl Blumenauer, D-Ore., said, "The Boeing-Airbus dispute has dragged on for 17 years with significant collateral damage, especially in the Pacific Northwest. In securing this significant agreement, President Biden and Ambassador Tai are showcasing just what America needs -- active leadership, problem solving, and working with our friends rather than against them."