US-EU trade war winding down with five-year suspension of tariffs

The United States and the European Union have resolved a trade dispute that had resulted in a ramping up of tariffs, including on some seafood products.

The quarrel, dating back to 2004, centered around subsidies for European airplane-maker Airbus and U.S. plane manufacturer Boeing. The dispute was brought before the World Trade Organization, which ruled in October 2020 that each side could impose billions of dollars in tariffs.

Under the direction of then-U.S. President Donald Trump, in 2019, the United States imposed USD 7.5 billion (EUR 6.8 billion) on 19 categories of European goods, including 25 percent tariffs on luxury food products such as cheese, olives, and wine. In turn, in October 2020, the European Commission instituted 25 percent tariffs on 130 U.S. products collectively valued at USD 4 billion (EUR 3.4 billion). But current U.S. President Joe Biden pushed for a détente after he was inaugurated in January 2021, and both sides agreed to suspend all tariffs in March as a resolution was negotiated.

That agreement came on Tuesday, 15 June, as the U.S. Trade Representative announced a cooperative framework that suspended U.S. tariffs on E.U. goods for five years.

“After years of bitter litigation and weeks of intense diplomacy, we have reached a deal on a set of high-level principles that resets U.S.-EU engagement in the large civil aircraft industry,” U.S. Trade Representative Katherine Tai said in a press release. “We are strongest when we work with our friends and allies, and the partnership with European Commission Executive Vice President Valdis Dombrovskis is a demonstration of that principle in action. Our goal was clear – to forge a new, cooperative relationship in this sector so that our companies and our workers can compete on a more level playing field.”

During the dispute, U.S. importers paid approximately USD 2.2 billion (EUR 1.8 billion) in duties, while European imports paid around USD 1.1 billion (EUR 908 million) in duties, according to the European Commission.

“With this agreement, we are grounding the Airbus-Boeing dispute. It proves that the trans-Atlantic relationship is now moving to the next level, and that we can work with the US on tackling long-running disputes,” European Commission Executive Vice-President Valdis Dombrovskis said. “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.”

In a press release, the National Fisheries Institute, the biggest U.S. seafood trade group, said it “applauded the decision” to end the tariffs.

“This bilateral action is an important development that helps seafood companies operate in a more predictable climate,” NFI President John Connelly said. The E.U. is an important growth market for U.S. seafood exporters, and they will benefit from this more stable environment. Throughout this dispute, seafood has been collateral damage, as fish swimming in the Atlantic Ocean could not be further from the planes flying overhead. Today’s announcement is welcome news.”

The U.S.-E.U. agreement includes a commitment to joint collaboration “to confront the threat from China’s non-market practices,” according to Tai.

“For almost 20 years we have been at each other’s throats, fighting each other in terms of competition between our industries. While we have been engaged in this fight, others are taking the opportunity to launch their own industries, and we have been too busy fighting each other to pay attention,” Tai said in a post-summit news conference, according to The New York Times.

The E.U. has long held the view that increasing trade with China could have a politically moderating impact, according to former International Monetary Fund China head Eswar S. Prasad. But the E.U. has changed its perspective and now views China as “an economic competitor and a systemic rival,” according to Prasad.

“The Biden administration is clearly eager to deescalate tensions with traditional allies while rebuilding a common front with them in getting tougher on China,” Prasad said. “In tandem with renewed U.S. leadership of the G7, it is becoming evident that the major Western economies are now uniting in their attempts to rein in what they view as unfair Chinese trade and economic practices.”

In her press conference, Tai said the agreement with the E.U. “creates a model we can build on for other challenges.”

Photo courtesy of The U.S.-China Business Council


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