EU-US aircraft deal heralds new trade cooperation in Biden era

US president, Joe Biden, during the EU-US summit on 15 June. [EU]

The first summit between the EU and US President Joe Biden concluded on Tuesday (15 June) with a deal on a five-year suspension of tariffs in the longstanding Airbus-Boeing dispute, paving the way for stronger cooperation against the challenges posed by China’s economic model.

Following 17 years of a legal battle over the subsidies Europe and Washington gave to their large aircraft manufacturers, Commission President Ursula von der Leyen announced an agreement that will suspend for five years the $11 billion tariffs that both sides imposed on products including EU wine or US motorcycles.

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The deal, which will prolong the truce in place since March, will set a series of parameters to limit the financing that European governments and US authorities can offer to their aircraft manufactures.  

“This really opens a new chapter in our relationship because we move from litigation to cooperation on aircraft – after 17 years of dispute,” von der Leyen told reporters after the summit in Brussels.

“This shows the new spirit of cooperation between the EU and the US and that we can solve the other issues to our mutual benefit,” she added.

For the US, the agreement represents an opportunity to bring closer the transatlantic partnership to face the growing challenge that China represents, including in the field of civil aviation. 

Eyeing Beijing, the two sides agreed to collaborate on addressing non-market practices of third parties that may harm their respective large civil aircraft industries.

“It’s a model we can build on for other challenges posed by China’s economic model,” Biden said in a statement. Contrary to common practice, he did not address reporters after the summit with EU leaders. 

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Speaking to a group of media including EURACTIV after the summit, US Trade Representative, Katherine Tai, highlighted the importance of the agreement not only to solve the 17-year dispute but also for the broader economic relationship.

“This was a test of our relationship and our ability to build confidence and trust that will take us into a future where the competition is going to get tougher and tougher,” Biden’s chief trade negotiator said. 

Steel tariffs 

The EU and the US, however, did not make substantial progress in solving the other tariff dispute triggered by the Trump administration’s decision to punish the EU’s steel and aluminium exporters.  

The summit conclusions said that both sides “will engage in discussions to allow the resolution of existing differences on measures regarding steel and aluminium before the end of the year.”

Von der Leyen told reporters that Brussels and Washington needed “a little bit more of time” as the priority for the negotiators ahead of the summit was to progress on the aircraft dispute. But she was confident that a solution would be reached before the end of the year.

Tai highlighted the importance of converting the current EU-US tensions into collaboration also in the steel and aluminium case because both sides have a “duty” to their companies and workers to address the overcapacity fuelled primarily by China.

But she did not want to commit about what results could be achieved over the next five and a half months, as the EU and the US will have to face “hard questions” and “deep feelings”.

America’s tariffs on steel and aluminium imports were imposed on national security grounds, as Washington considered that they may represent a threat to a sector critically important not only for the economy but for the nation. 

The duties serve to protect industries and workers in states that will be relevant for the mid-term elections in the United States in 2022.

New bodies

As regards the World Trade Organisation reform, one of the priorities to better address China’s unfair trade practices, both sides committed to updating the WTO’s rulebook “with more effective disciplines on industrial subsidies, unfair behaviour of state-owned enterprises, and other trade and market-distorting practices.” 

In addition, Brussels and Washington will cooperate to address “long-standing issues” of the WTO’s dispute settlement system, which came to a halt because of the US’s blockade of the process to nominate new members for the appellate body.

Both sides also agreed on setting up a new EU-US Trade and Technology Council to strengthen the cooperation on technology, digital issues and supply chains, but also on standards and regulatory policy, seeking convergence where possible.

In light of the current shortage of semiconductors, and the concentration of manufacturers of these strategic products in Asia, the EU and Washington committed to building an EU-US partnership aiming to rebalance global supply chains in semiconductors, enhance the security of supply and produce “the most powerful and resource-efficient semiconductors.”

The EU and the US also announced the intention to establish a Joint Technology Competition Policy Dialogue to discuss approaches in competition policy and enforcement in the tech sector.

[Edited by Zoran Radosavljevic]

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