After 17 Year War on Aircraft Subsidies, US, EU Consider Truce | Aviation News

The United States and Europe are stepping up efforts to reach a pact to end a 17-year-old dispute over aircraft subsidies, but may be satisfied with an extended truce in recent tariff wars, people have said close to the file.

A deal to end or suspend the world’s largest business-to-business trade dispute would give relief to dozens of other industries hit by tariffs that were suspended in March. They face another trade war in a few weeks if there is no progress.

U.S. Trade Representative Katherine Tai discussed the dispute during her first face-to-face meeting with her European counterpart Valdis Dombrovskis on Monday before the U.S.-EU summit on Tuesday. She is heading to the UK on Wednesday.

The European Commission, which oversees EU trade policy, and the United States are eager to find a solution by July 11, when the current suspension of transatlantic tariffs ends.

The two sides have targeted a pair of treaties – one between the US and the European Union, the original parties, and another between Washington and London after the UK exits the EU – on news ground rules for aerospace.

Unless there is a detailed agreement, they could opt for a standstill deal that postpones tariff resumption for several years, but no final decision has been made, one of the people said.

Reset relationships

US President Joe Biden has vowed to restore relations with European partners after four tumultuous years under former President Donald Trump.

Trade experts said an agreement to freeze conflict over aircraft subsidies, some of which have been canceled or removed, would give both sides more time to focus on broader agendas such as concerns over the model. Chinese state-run economy.

Tariffs on $ 11.5 billion worth of goods were phased in from 2019 after the US and EU both won partial victories at the World Trade Organization (WTO) over allegations of unfair aid to aircraft manufacturers Boeing and Airbus.

The dispute has dragged on since 2004, when the United States withdrew from a 1992 aircraft subsidy pact and took the EU to the WTO, claiming that Airbus had managed to match Boeing’s share of the market. planes thanks in part to subsidized government loans.

The EU has filed a counter-action for what it called unfair support for R&D and subsidized tax incentives for Boeing.

In a potentially key breakthrough, the United States eased opposition to the principle of future public loans for Airbus, but insisted that they must be clearly market-based and notified in advance, officials said. people familiar with the talks.

But obstacles remain as to the extent to which this could effectively allow Washington to approve or block European projects, they added. The EU has vehemently opposed any US veto.

Even more critical is the benchmark to be used in deciding whether interest on future loans is compatible with the market.

Under the 1992 grant pact, one-third of a project could be funded through direct government support such as loans and indirect R&D support up to 4 percent of a firm’s income.

One option is to review this framework with market rules replacing subsidy quotas and a new ceiling on indirect support for R&D.

Neither party has agreed to comment on the talks.

China “on the radar”

Robert Lighthizer, former US trade official, had suggested US and EU join forces against China on aircraft subsidies [File: Elijah Nouvelage/Bloomberg]

In December 2020, outgoing U.S. Trade Representative Robert Lighthizer told Reuters that the United States and Europe should cooperate to oppose future aerospace subsidies used by China.

The United States has launched a joint review of aerospace financing in non-market economies like China, two people said.

“There is no doubt that the rise of the Chinese aviation industry is … on everyone’s proverbial radar,” US Chamber of Commerce Senior Vice President Marjorie Chorlins said Monday, noting what she called “heavy subsidies” from China.

Like the United States, the EU fought with Beijing over trade and security this year. But its 27 nations may find it difficult to agree on a common front on topics like aerospace.

In April, for example, Hungary blocked an EU statement criticizing China’s new Hong Kong security law, sparking a row over member states’ right to veto EU foreign policy. .

The Chinese Embassy in Washington did not immediately comment.

Complications of Brexit

Brexit also complicated negotiations.

The UK and US nearly struck an aerospace deal in December that could have forced Brussels’ hand in its own talks with Washington.

But it collapsed amid British concerns about jobs and was ultimately overwhelmed by the political distractions surrounding the unrest in Washington in January, multiple sources said. A British official said a balanced deal was out of reach at the time.

The UK’s ability to negotiate trade deals independently of the EU is at the heart of its new position as ‘Global Britain’. But its flexibility on Airbus is limited by its role as one of the four main countries involved in the aircraft manufacturer, before it joined the EU.

Airbus, which has 14,000 employees in the UK, has made it clear that work could move overseas if the UK turns its back on aerospace.

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