June 9, 2021
The European Union and the United States reached a truce in their 17-year dispute over aircraft subsidies, agreeing to suspend tariffs for five years. This marked a significant step in resolving one of the longest-running trade disputes.
Brussels, Belgium | European Union
On June 9, 2021, the European Union and the United States reached a pivotal agreement to suspend tariffs for five years, effectively pausing a 17-year-long trade dispute over aircraft subsidies. This truce marked a significant step towards resolving one of the most protracted and contentious trade conflicts in modern history.
The dispute originated in 2004 when the United States filed a case with the World Trade Organization (WTO) against the European Union, alleging that the EU had provided illegal subsidies to Airbus, the European aerospace corporation. The EU responded with a counterclaim, accusing the US of offering unlawful subsidies to Boeing, its own aerospace giant. This led to a series of legal battles and retaliatory tariffs that affected a wide range of industries beyond aerospace, including agriculture and consumer goods.
WTO Rulings: Over the years, the WTO issued several rulings, finding both Airbus and Boeing guilty of receiving unfair subsidies. These rulings allowed both the EU and the US to impose tariffs on each other’s goods, escalating the trade tensions.
Retaliatory Tariffs: In 2019, the WTO authorized the US to impose tariffs on \(7.5 billion worth of EU goods, the largest in the organization's history. In response, the EU was permitted to levy tariffs on \)4 billion of US products in 2020.
Biden Administration’s Approach: The election of President Joe Biden in 2020 brought a shift in US trade policy, emphasizing multilateralism and cooperation with allies. This change in approach facilitated negotiations with the EU to resolve the dispute.
The truce announced on June 9, 2021, involved both parties agreeing to suspend the retaliatory tariffs for five years. This suspension provided a window for both sides to negotiate a long-term solution to the subsidy issue. The agreement also included a commitment to collaborate on addressing non-market practices, particularly focusing on challenges posed by countries like China.
Economic Impact: The suspension of tariffs was a relief for industries affected by the trade war, including agriculture, spirits, and luxury goods, which had faced increased costs and market disruptions.
Transatlantic Relations: The truce was a significant step in mending transatlantic relations, which had been strained during the previous US administration. It underscored a renewed commitment to cooperation between the EU and the US.
Global Trade Dynamics: By resolving one of the longest-running trade disputes, the agreement set a precedent for addressing other trade conflicts through negotiation and collaboration rather than prolonged litigation and tariffs.
The June 9, 2021, truce between the EU and the US over aircraft subsidies was a landmark moment in international trade relations. It not only paused a 17-year dispute but also paved the way for more constructive engagement on global trade issues, reflecting a broader shift towards diplomacy and partnership in addressing international economic challenges.
Source: ec.europa.eu