April 12, 2021

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US, EU to suspend tariffs in Boeing-Airbus dispute

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A first phone call on Friday clinched the first trade breakthrough to start rebuilding transatlantic relations between the United States and the European Union in the wake of the Trump presidency.

After US President Joe Biden and European Commission President Ursula von der Leyen spoke, both sides decided to suspend tariffs used in the long-standing Airbus-Boeing dispute for the next four months.

Von der Leyen said that “as a symbol of this fresh start, President Biden and I agreed to suspend all our tariffs imposed in the context of the Airbus-Boeing disputes, both on aircraft and non-aircraft products, for an initial period of four months.”

The discussion hardly covered all outstanding issues that were left to fester ever more under the four-year presidency of former President Donald Trump, but the EU gladly took whatever it could get from the first personal exchange between the Biden and von der Leyen.

Von der Leyen called it “a very positive signal for our economic cooperation in the years to come”.

“This is excellent news for businesses and industries on both sides of the Atlantic,” she said.

With the initiative to ease the aircraft fight that long weighed on trade relations, the European Union – a 27-nation bloc whose executive branch is the European Commission – is seeking to rekindle the spirit of cooperation between Washington and Europe that has long defined global diplomacy.

Von der Leyen hopes it is the first indication that both the US and Europe will stand shoulder to shoulder like they have so often over the past century to face global challenges.

Von der Leyen said she invited Biden to a global health summit in Rome on May 21 to streamline the fight against COVID-19, the common enemy that has killed over a million people in the EU and US combined. She hopes the commonality would extend to foreign policy issues as well, where both could cooperate better to face the rising power of China.

On Friday though, it was trade that mattered and the suspension will give a four-month window to address the more fundamental issues. In the aircraft dispute, the US was allowed to impose tariffs on $7.5bn of EU exports to the US and as a result of the deal, EU tariffs will be suspended on $4bn of US exports.

The tariff suspension will affect everyone from French winemakers to German cookie bakers in Europe and US spirits producers, among many others.

“Lifting this tariff burden will support the recovery of restaurants, bars and small craft distilleries across that country that were forced to shut down their businesses during the pandemic,” the US Distilled Spirits Council said.

Not that both sides can now drink to the cessation of trade hostilities.

Still outstanding, for example are the tariffs that Trump slapped on EU steel and aluminium, which enraged Europeans and other allies by calling their metals a threat to US national security. The so-called Article 232 proceeding both hurts European producers and raises the cost of steel for US companies. Europe retaliated by raising tariffs on US-made motorcycles, bourbon, peanut butter and jeans.

And Friday’s mellow phone call has not dented Europe’s push for digital taxes on US tech behemoths like Google and Amazon.

The breakthrough in the aircraft dispute, heading into its 17th year, should not be underestimated, though.

Only last November, the EU imposed tariffs on up to $4bn worth of US goods and services over illegal aid for planemaker Boeing, even though the 27 EU nations already held out hope relations would improve under Biden.

The move came only a few weeks after international arbitrators gave the EU the green light for such punitive action. The World Trade Organization (WTO) had deemed illegal some US support for Boeing — which is a bitter rival of Europe’s Airbus — and said the EU could make up for that with a limited amount of penalties on US trade.

The WTO had ruled that Boeing was given an unfair edge over Airbus by tax breaks from Washington state, where Boeing once had its headquarters. But after the WTO decision, the state repealed the tax breaks, making the EU’s complaint obsolete in the view of US officials.

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