The International Business Transactions Blog

From Litigation to Cooperation: Ending the US/EU Aircraft Tariffs

By BethEl Nager
Law Student Editor

n June 15, 2021 President Biden entered into an agreement with the European Union (EU) to suspend tariffs on Boeing and Airbus. For 17 years, the US and EU claimed the other was unfairly subsidizing the aircraft-giants. Prior to this agreement, the World Trade Organization (WTO) Dispute Settlement Body declared both sides at fault and authorized billions of dollars in retaliatory tariffs. 

This new agreement will resolve the dispute for a period of five years. Despite this agreement, scholars argue that some countries within the EU might push back due to the strong reliance on the export market from China. 

Recently, China has created a state-sponsored aircraft manufacturer, Commercial Aircraft Corporation of China. In 2017, this company completed its first public flight test for a passenger aircraft. The US and EU are concerned with this company becoming a rival against Boeing and Airbus. 

Currently, Boeing and Airbus make up a near duopoly of the commercial aircraft market, but both have been suffering due to the COVID-19 pandemic. Through the agreement suspending tariffs on aircrafts, the US and EU can ensure China will not divide the West and pit major players against each other. This deal will promote competitiveness and creativity among aircraft manufacturing, one of the largest sources of middle-class jobs.

Before the agreement was signed, Boeing had ceased receiving a federal tax subsidy from the US, while Airbus was considering making large loan-repayments to different EU countries. The new agreement sets limits on the amount of subsidies from EU countries to Airbus. The US could still impose tariffs if the EU goes beyond the threshold.

The agreement between the US and EU, suspending tariffs on aircrafts, will officially begin on  July 11, 2021 and put the tariffs on hold through July of 2026. According to a Commissioner of the EU, “five years’ time is sufficient to on both sides so we can then put this dispute definitely to rest.”