EU and US take decisive step to end aircraft dispute

This article is brought to you in association with the European Commission.

European Commission Executive Vice-President Valdis Dombrovskis and US Trade Representative Katherine Tai reached an understanding relating to large civil aircraft, transforming almost 17 years of disputes into a forward-looking, collaborative platform to address bilateral issues as well as global challenges.

Both sides will now seek to overcome long-standing differences in order to avoid future litigation and preserve a level playing field between our aircraft manufacturers and will also work to prevent new differences from arising.

The EU and the US also agreed to suspend application of harmful tariffs worth of USD 11.5 billion for a period of five years that hurt companies and people on both sides of the Atlantic.

The two sides will  collaborate on jointly analysing and addressing non-market practices of third parties that may harm our large civil aircraft sectors.    

European Commission President Ursula von der Leyen said: “Today, with the agreement on Boeing-Airbus, we have taken a major step in resolving the longest trade dispute in the history of the WTO. I am happy to see that after intensive work between the European Commission and the US administration, our transatlantic partnership is on its way to reaching cruising speed. This shows the new spirit of cooperation between the EU and the US and that we can solve the other issues to our mutual benefit. Together we can deliver for our citizens and businesses.”

European Commission Executive Vice-President Valdis Dombrovskis said: “With this agreement, we are grounding the Airbus-Boeing dispute. It proves that the transatlantic relationship is now moving to the next level, and that we can work with the US on tackling long-running disputes. We now have time and space to find a lasting solution through our new Working Group on Aircraft, while saving billions of euros in duties for importers on both sides of the Atlantic.”

Under the Understanding on a cooperative framework for Large Civil Aircraft, the two sides expressed their intention to:

• establish a Working Group on Large Civil Aircraft led by each side’s respective Minister responsible for Trade,
• provide financing to large civil aircraft producers on market terms,
• provide R&D funding through an open and transparent process and make the results of fully government funded R&D widely available, to the extent permitted by law,
• not to provide R&D funding as well as specific support (such as specific tax breaks) to their own producers that would harm the other side,
• collaborate on addressing non-market practices of third parties that may harm their respective large civil aircraft industries,
• continue to suspend application of their countermeasures, for a period of 5 years, avoiding billions of euros in duties for importers on both sides of the Atlantic.

The European Union and the United States disputes on Large Civil Aircraft (LCA; also known as Airbus-Boeing Dispute) is the longest running dispute in the history of the World Trade Organisation  (WTO).  

It started in 2004,  when the US filed a case at the WTO against the EU, arguing that the bloc was illegally subsidising the European Large Civil Aircraft (LCA) manufacturer Airbus. The EU also filed a complaint against the US in May 2005, for its unlawful support to Boeing.   

Following WTO decisions, both the US (in October 2019) and the EU (in November 2020) imposed punitive tariffs on each other’s exports, affecting in total a value of 11.5 billion dollars of trade between the two sides. As a result, EU and US businesses have had to pay over 3.3 billion dollars in duties. 

Next steps

The two sides will continue discussions to operationalise their intentions regarding financing, research and development funding as well as specific support of large civil aircraft.

The EU-US aircraft dispute in numbers  

US countermeasures in the Airbus case affected 19 different product categories, including aircraft, wines and spirits, dairy and cheese or machinery, in a value of USD 7.5 billion. Tariffs were 15% on aircraft and 25% non-aircraft products, and led to some USD 2.2 billion in duties paid by US importers.

EU countermeasures in the Boeing case affected 130 different product categories, including aircraft, nuts, tobacco, spirits, handbags or tractors, in a value of USD 4 billion. Tariffs were 15% on aircraft and 25% non-aircraft products, and led to some USD 1.1 billion in duties paid by EU importers.

The recent history of the EU-US Aircraft dispute

In May 2018, the WTO’s highest decision making instance, the Appellate Body found that the EU and its Member States had not fully complied with the previous WTO rulings. As a result, the WTO allowed the US to take countermeasures against European exports worth up to USD 7.5 billion. The U.S. imposed these measures in October 2019. 

In March 2019, the WTO’s Appellate Body confirmed that the US continued its illegal support of its aircraft manufacturer Boeing to the detriment of Airbus, the European aerospace industry and its many workers. After the authorisation by WTO, the EU imposed countermeasures on USD 4 billion worth of US exports to the EU (in November 2020). 

In July 2020, Airbus and certain Member States announced decisive steps to ensure their full compliance with their international obligations arising from the WTO ruling against the EU, and called on the US to lift their countermeasures against the EU.  

On 5 March 2021, the EU and US agreed today to suspend all retaliatory tariffs on EU and US exports imposed in the Airbus and Boeing disputes for a four-month period. The suspension allowed both sides to focus on resolving this long-running dispute.