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Airbus and Boeing Behind U.S./EU Tariff Threats
In 2006 U.S. aircraft manufacturer Boeing filed a case with the World Trade Organization alleging that the European aircraft manufacturer Airbus, jointly owned by Germany, Spain, France, and partially the UK, had received billions in illegal subsidies amounting to $22 billion that gave Airbus an unfair advantage in the aviation markets.
A few months after the initial filing by the United States, the European Union countered by alleging that Boeing had received $23 billion in “trade-distorting” benefits and subsidies from the U.S. government through research and development projects.
The case has been dragging on for over a decade with both sides claiming victories. In 2016 there was a WTO ruling that stated that the European Union had indeed supported Airbus with subsidized loans for the Airbus A380’s development along with Airbus A350 development costs. The U.S. claimed that this harm was around $11 billion each year. The WTO declared that these loans which were repayable on delivery amounted to illegal assistance from the governments to Airbus. This ruling was upheld by a WTO appeals committee in 2018.
In 2019, the EU scored a victory as well against Boeing. The WTO ruled that favorable contract terms and tax breaks given to Boeing had hurt Airbus sales.
This past September, the WTO has ruled that the United States can go ahead and target the European Union with billions of dollars of punitive tariffs. However, the EU expects that the complaint it has filed against the U.S. and Boeing will be ruled in its favor giving the European Union the right to retaliate with its own tariffs next year.
The United States has a prepared list of EU products worth $25 billion that could be hit with tariffs, covering a broad array of products including olive oil, cheeses, and alcohol.
The EU has also prepared its own list of products worth $20 billion as a counter targeting items such as aircraft, chemicals, citrus fruit, and ketchup.
Airbus has called for negotiations to settle the trade dispute to prevent escalation to an all-out trade war which would be a “lose-lose scenario for the whole industry.” This comes at a time when both the United States and European Union are pressing forward in their attempts to punish the other with the French finance minister saying that Europe is ready to impose retaliatory tariffs next year if needed.
Both the United States and European Union seem eager to avoid tariffs pending a fair-trade agreement is reached. Talks however have progressed slowly so hopefully this can act as a catalyst to speed things along
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