Worldwide:
US and EU suspend high tariffs on civil aircraft and attack China to combat non-market practices
June 21, 2021
Husch Blackwell LLP
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The United States and the European Union (“EU”) announced a “collaborative framework” to address and possibly resolve their longstanding dispute over large civil aircraft subsidies, also known as the Boeing-Airbus or Large Civil Aircraft disputes. Originally initiated in 2004 when the US filed a lawsuit against the EU with the World Trade Organization (WTO) over alleged illegal subsidies for Airbus SE, the dispute over large civil aircraft is the longest-running dispute at the WTO. As part of the new deal, the US and EU will suspend their respective WTO-approved countermeasures against tariffs, which affected a total of $ 11.5 billion in trade. The announcement by the US and the EU is an important step in the possible resolution of the 17-year-old transatlantic dispute over aircraft subsidies.
As previously reported, the first tariffs occurred in October 2019 when the US put tariffs on imports of civil aircraft and aircraft parts (under HTSUS codes 8802.40.0013, 8802.40.0015, 8802.40) under Section 301 of the Trade Expansion Act of 1962 15 percent collected 0.0017, 8802.40.0019 and 8802.40.0021). For all other listed EU imports of origin, which include agricultural products, spirits and luxury goods, the US introduced a rate of 25 percent. The EU responded in November 2020 with tariffs on US imports worth around 4 billion US dollars, with corresponding rates of 15 percent for civil aircraft and aircraft parts and 25 percent for all other imports from the USA, agricultural products and industrial products. and cover finished goods.
As part of the agreement on a framework for cooperation for large civil aircraft, the US and the EU have expressed their intention to:
- Establishment of a working group for large civil aircraft under the direction of the respective Minister of Commerce on each side, which meets every 6 months or on request,
- Providing finance to major civil aircraft manufacturers only on market terms,
- Provision of R&D funding through an open and transparent process and provision of the results of fully government-funded R&D, to the extent permitted by law,
- not to provide their own producers with R&D funding or specific support (e.g. specific tax breaks) that would harm the other side,
- Working together to combat non-market practices by third parties that may harm their respective major civil aviation industries,
- Continue to suspend the application of their countermeasures for a period of 5 years in order to avoid tariffs running into billions for importers on both sides of the Atlantic.
According to US Trade Representative (“USTR”) Katherine Tai, tariffs would remain suspended as long as the terms of the agreement are respected and problems are addressed, including outstanding subsidies already paid.
The US-EU framework for cooperation also includes an “Annex on Non-Market Cooperation” to “more effectively address” the challenges of non-market economies in the civil aviation sector. These collaborative steps include coordinating and investigating the exchange of information on cybersecurity and other issues, screening inbound and outbound investments, and “joint analysis of non-market practices”, particularly China, in the large civil aircraft sector. USTR Tai described the deal as “a model we can build on for other challenges” in the context of “the threat posed by China’s non-market-oriented practices”.
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