Background

Tariffs on billions of dollars’ worth of transatlantic trade will suspended for five years as the U.S. and the European Union work to resolve a nearly two decade-long dispute over aircraft production subsidies.

Both sides had previously suspended these tariffs through July 11. The U.S. tariffs had been 25 percent (in addition to MFN tariffs) on more than 150 products imported from EU member countries and 15 percent for new aircraft from France, Germany, Spain and the United Kingdom (click here for the original and amended product lists). The EU tariffs had been 25 percent on $4 billion worth of products from the U.S.

U.S. Trade Representative Katherine Tai said the tariff suspension reflects the expectation that both the U.S. and EU will contribute to establishing a level playing field in the large civil aircraft industry. Toward this end, the EU said the two sides will establish a trade minister-led working group that will meet at least every six months to “seek to overcome long-standing differences in order to avoid future litigation and … to prevent new differences from arising.” They also committed to providing their respective LCA producers with financing on market terms and research and development funding through an open and transparent process. However, Tai warned that tariffs could be reactivated “if we’re no longer competing on a level playing field.”

The working group will also be a primary forum for what Tai said would be efforts to “challenge and counter China’s non-market practices in this sector in specific ways that reflect our standards for fair competition.” Work in this area will include sharing information on cybersecurity concerns, exploring common approaches and enhanced cooperation on screening inward and outward investments in the LCA sector to prevent detrimental technology transfer or appropriation, and clarifying the extent of state support in non-market economies “with the goal of establishing the basis for joint or parallel action in the future.”

Tai added that this agreement “is a model that we will use to build on for other challenges posed by China and non-market economic competition.” This could portend the suspension or elimination of the Section 232 tariffs the U.S. has in place against steel and aluminum products, given that the underlying concern is widely considered to be overproduction in China, as well as the tariffs the EU imposed on U.S. goods in retaliation. The two sides said they would “engage in discussions to allow the resolution of existing differences” on this issue “before the end of the year.”

For more information on the tariffs being imposed in the aircraft subsidy dispute and how to mitigate their impact, please contact Nicole Bivens Collinson (at (202) 730-4956 or via email) or Kristen Smith (at (202) 730-4965 or via email).

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