Airbus-Boeing large civil aircraft disputes

U.S. and EU issue joint statement suspending for four months retaliatory tariffs from large civil aircraft WTO disputes (Airbus-Boeing)

Yesterday, the U.S. and United Kingdom announced a four month suspension of retaliatory tariffs from the Airbus-Boeing WTO disputes to provide time to seek a negotiated solution. As noted in my post on the development, it was expected that a similar agreement would be reached with the EU. See March 4, 2021, First step in resolving the Airbus-Boeing WTO dispute — U.K. and U.S. announce four month suspension of retaliatory tariffs effective March 4, 2021, https://currentthoughtsontrade.com/2021/03/04/first-step-in-resolving-the-airbus-boeing-wto-dispute-u-k-and-u-s-announce-four-month-suspension-of-retaliatory-tariffs-effective-march-4-2021/

Today a joint statement was released by the U.S. and the European Union on a similar four-month suspension of retaliatory tariffs. See USTR, Joint Statement of the European Union and the United States on the Large Civil Aircraft WTO Disputes, March 5, 2021, https://ustr.gov/about-us/policy-offices/press-office/press-releases/2021/march/joint-statement-european-union-and-united-states-large-civil-aircraft-wto-disputes. The text of the joint statement is copied below.

“’The European Union and the United States today agreed on the mutual suspension for four months of the tariffs related to the World Trade Organization (WTO) Aircraft disputes. The suspension will cover all tariffs both on aircraft as well as on non-aircraft products, and will become effective as soon as the internal procedures on both sides are completed. 

“’This will allow the EU and the US to ease the burden on their industries and workers and focus efforts towards resolving these long running disputes at the WTO.

“’The EU and the US are committed to reach a comprehensive and durable negotiated solution to the Aircraft disputes. Key elements of a negotiated solution will include disciplines on future support in this sector, outstanding support measures, monitoring and enforcement, and addressing the trade distortive practices of and challenges posed by new entrants to the sector from non-market economies, such as China.

“’These steps signal the determination of both sides to embark on a fresh start in the relationship.’”

The agreement to suspend the retaliatory tariffs for four months was the result of a phone call between President Biden and EC President von der Leyen.

The White House has the following readout of the phone call:

Readout of President Joseph R. Biden, Jr. Call with European Commission President Ursula von der Leyen

“MARCH 05, 2021 • STATEMENTS AND RELEASES

“President Joseph R. Biden spoke today with European Commission President Ursula von der Leyen. He underscored his support for the European Union and his commitment to repair and revitalize the U.S.-EU partnership. Noting our shared values and the world’s largest trade and investment relationship, the leaders agreed to suspend the tariffs related to the World Trade Organization (WTO) Aircraft disputes for four months and to work toward resolving these long running disputes at the WTO.  They discussed the importance of close U.S.-EU cooperation to contain the COVID-19 pandemic and enhance global health security, pursue a sustainable global economic recovery, tackle the climate crisis, and strengthen democracy.  The leaders also agreed to coordinate on issues of shared interest, including China, Russia, Belarus, Ukraine, and the Western Balkans.” https://www.whitehouse.gov/briefing-room/statements-releases/2021/03/05/readout-of-president-joseph-r-biden-jr-call-with-european-commission-president-ursula-von-der-leyen/.

The European Commission President von der Leyen issued a press release after her conversation with President Biden. See European Commission, Statement by President von der Leyen following her phone call with President of the United States Joe Biden, March 5, 2021, The press release is embedded below but the relevant paragraphs on the suspension of tariffs are copied below before the full press release.

“As a symbol of this fresh start, President Biden and I agreed to suspend all our tariffs imposed in the context of the Airbus-Boeing disputes, both on aircraft and non-aircraft products, for an initial period of 4 months. We both committed to focus on resolving our aircraft disputes, based on the work our respective trade representatives. This is excellent news for businesses and industries on both sides of the Atlantic, and a very positive signal for our economic cooperation in the years to come.”

Statement_by_President_von_der_Leyen_following_her_phone_call_with_President_of_the_United_States_Joe_Biden

EC Trade Commissioner Valdis Dombrovskis in a tweet indicated the suspension had been agreed and stated that “This is a major breakthrough that provides a welcome boost to EU exporters & it gives both sides time & space to resolve this long-running dispute.” https://twitter.com/VDombrovskis/status/1367888145505783810. See also Financial Times, EU and US agree to suspend tariffs in Airbus-Boeing dispute, March 5, 2021, https://www.ft.com/content/3da1759f-894e-4c1d-813f-5012d96bf52b.

While the development was not unexpected in light of yesterday’s announcement, it is a further sign of the major effort of the Biden Administration to work with our allies such as the European Union and is another manifestation of the Biden Administration’s embrace of multilateral solutions and working with allies.

First step in resolving the Airbus-Boeing WTO dispute — U.K. and U.S. announce four month suspension of retaliatory tariffs effective March 4, 2021

For the U.S., EU and U.K., finding a path to resolving the long-running dispute on civil aircraft subsidies is a major priority. Both the U.S. and the EU have been authorized to retaliate by the WTO in recent years. Some efforts at finding a resolution were pursued during the Trump Administration. The Biden Administration has made it clear that it wants to find ways to work with our allies and resolving the underlying civil aircraft dispute has been a topic covered by President Biden’s USTR nominee Katherine Tai in her confirmation hearing. See March 2, 2021, Katherine Tai, USTR designate, on addressing WTO reform including dispute settlement if confirmed; the USTR 2021 Trade Policy Agenda, https://currentthoughtsontrade.com/2021/03/02/katherine-tai-ustr-designate-on-addressing-wto-reform-including-dispute-settlement-if-confirmed-the-ustr-2021-trade-policy-agenda/.

Today the U.S. and the United Kingdom released a joint statement following agreement to suspend retaliatory tariffs for four months from March 4, 2021 to provide space for seeking a negotiated solution. The U.K. had suspended retaliatory tariffs since January 1st. See USTR, Joint US-UK Statement on Suspension of Large Civilian Aircraft Tariffs, March 4, 2021, https://ustr.gov/about-us/policy-offices/press-office/press-releases/2021/march/joint-us-uk-statement-suspension-large-civilian-aircraft-tariffs. The joint statement is embedded below.

US-UK-4-month-tariff-suspension-to-ease-the-burden-on-industry-while-seek-resolution-of-Airbus-Boeing-disputes

The announcement does not include the EU as a party, but it is expected that the EU will join such action since they are the major European party and face the largest amount of retaliation. In early December 2020, during the last months of the Trump Administration, EC Trade Commissioner Valdis Dombrovskis had indicated the EU would suspend retaliatory tariffs if the U.S. did as well. See Bloomberg, EU Says Boeing-Airbus Dispute Can Be Settled Under Trump, December 3, 2020, https://www.bloomberg.com/news/articles/2020-12-03/eu-says-boeing-airbus-dispute-can-be-settled-under-trump (“EU Trade Commissioner Valdis Dombrovskis said ‘it’s possible’ that both sides will reach an agreement by Jan. 20 governing aid to Boeing Co. and Airbus SE. He reiterated an offer to remove EU retaliatory tariffs on $4 billion of American goods if the U.S. does the same for its duties on $7.5 billion of European products. ‘The solution which would be preferred by the EU would be that both sides withdraw or at least suspend their tariffs and we reach agreement on future disciplines in the area of civil aviation,’ Dombrovskis said in an interview with Bloomberg TV on Thursday. ‘We are still intensively engaged with the current U.S. administration.'”).

The U.S. goal is certainly to find a solution that works for the Boeing Company and that permits the U.S., EU and U.K. to turn their attention to the challenges in the civil aircraft industry by major new entrants like China. Today’s action with the U.K. is the first step in the Biden Administration’s efforts to get this dispute resolved.

U.S. decides not to modify retaliation list of goods from WTO dispute with EU on Airbus subsidies

The Biden Administration has continued its efforts at greater international outreach and collaboration by deciding, in consultation with the U.S. civil aircraft industry, not to modify the retaliation list of EU goods as the U.S. and the EU look to find a resolution to the long-running Airbus-Boeing dispute hopefully by mid-year. The Federal Register notice of today is copied below. See USTR, Notice Regarding Periodic Revision of Section 301 Action: Enforcement of U.S. WTO Rights in Large Civil Aircraft Dispute, 86 FR 9420 -9421(February 12, 2021).

SUMMARY: The U.S. Trade Representative together with the affected United States industry have agreed that it is unnecessary at this time to revise the action in the Section 301 investigation involving the enforcement of U.S. rights in the World Trade Organization (WTO) dispute involving Large Civil Aircraft subsidies provided by certain current or former member States of the European Union. The U.S. Trade Representative will continue to consider the action taken in the investigation.

DATES: This exception to periodic revisions is applicable as of February 8, 2021.

FOR FURTHER INFORMATION CONTACT: For questions about the investigation or this notice, contact Associate General Counsel Megan Grimball, at (202) 395– 5725, or Director for Europe Michael Rogers, at (202) 395–3320.

SUPPLEMENTARY INFORMATION

“A. Proceedings in the Investigation

“For background on the proceedings in this investigation, please see the prior notices issued in the investigation, including: Notice of initiation (84 FR 15028 (April 12, 2019)); notice of determination and action (84 FR 54245 (October 9, 2019)); and notices of revision of action (85 FR 10204 (February 21, 2020), 85 FR 50866 (August 18, 2020), and 86 FR 674 (January 6, 2021)).

B. Periodic Revisions and Exceptions Thereto

“Section 306(b)(2)(B)–(F) of the Trade Act of 1974, as amended, provides for periodic revisions of the list of goods subject to additional duties imposed in response to the failure of a U.S. trading partner to implement a WTO Dispute Settlement Body (DSB) recommendation. The statute includes exceptions to the periodic revisions. As relevant here, section 306(b)(2)(B)(ii)(II) provides that no revision is required if the U.S. Trade Representative and the U.S. industry affected by the noncompliance with the DSB recommendation agree that a revision of the list is unnecessary.

“The most recent revision to the list of goods subject to additional duties was effective on January 12, 2021. See 86 FR 674 (January 6, 2021). In light of the recent revision, the U.S. Trade Representative has agreed with the affected U.S. industry that it is unnecessary at this time to revise the action. The U.S. Trade Representative will continue to consider the action taken in this investigation.

William Busis,

“Deputy Assistant USTR for Monitoring and Enforcement and Chair, Section 301 Committee, Office of the United States Trade Representative

Both the U.S. and EU have been interested in finding a resolution to the seventeen year dispute on subsidies to Airbus and Boeing. See, e.g., Bloomberg, EU Looks Past Trump to Defuse Transatlantic Trade Conflict, January 11, 2021, https://www.bloomberg.com/news/articles/2021-01-11/eu-looks-past-trump-to-defuse-transatlantic-trade-conflict; Reuters, EU trade official wants swift engagement with Biden on aircraft, digital taxes, WTO, January 15, 2021, https://www.reuters.com/article/us-usa-trade-eu/eu-trade-official-wants-swift-engagement-with-biden-on-aircraft-digital-taxes-wto-idUSKBN29K1X5. The action by the United States is one of a series of actions demonstrating an interest by the Biden Administration in finding resolutions to transatlantic issues and reengaging in multilateral organizations.

On his first day as President, President Biden sent notices of the U.S. rejoining the Paris Climate Agreement and of its revoking its withdrawal from the World Health Organization. These actions were obviously positive steps by the U.S. in the eyes of many countries including the European Union member states. See White House, January 20, 2021, Paris Climate Agreement, https://www.whitehouse.gov/briefing-room/statements-releases/2021/01/20/paris-climate-agreement/; President Biden, Letter to His Excellency António Guterres, January 20, 2021, https://www.whitehouse.gov/briefing-room/statements-releases/2021/01/20/letter-his-excellency-antonio-guterres/.

Similarly Treasury Secretary Janet Yellen in communications with some of her European counterpart has indicated the U.S. interest in finding a resolution within the OECD/G-20 process to the issue of digital services taxes, an issue where 301 investigations under the Trump Administration found various EU member state actions as unfair to U.S. interests. Yellen has indicated that resort to 301 duties remain on the table if there isn’t a resolution. Obtaining an international agreement on taxes has been an objective of many countries, including the European Union. International Tax Review, Yellen picks notable experts to join the US Treasury’s digital tax talks, February 5, 2021, https://www.internationaltaxreview.com/article/b1qfh1hw0xy7z2/yellen-picks-notable-experts-to-join-the-us-treasurys-digital-tax-talks. Resolution by the end of June 2021 is the current timeline being pursued by parties.

Similarly, while the Biden Administration doesn’t have its full trade team in place as yet, USTR issued a release last Friday that, following the announcement that the South Korean Trade Minister Yoo Myung-hee was withdrawing from the contest for the Director-General of the WTO position, the U.S. was throwing its support behind Dr. Ngozi Okonjo-Iweala. Dr. Okonjo-Iweala is the candidate that pursuant to the procedures being followed in the selection process had been identified as the candidate most likely to attract a consensus back in October before the U.S. had indicated its unwillingness to join a consensus behind her. With the special General Council meeting scheduled for February 15 at 3 p.m., the WTO will have a new Director-General in a matter of days. Nearly all WTO Members, including the EU and its member states, have been anxious for a resolution to the selection of the next Director-General.

And as the Reuters article cited above reviews, the European Union has been looking at WTO reform including the possibility of agreeing to a limiting of the role of dispute settlement and is looking to engage with the U.S. on solving the longstanding U.S. concerns of the WTO dispute settlement system, particularly the operation of the Appellate Body. Assuming the Biden Administration will move in the coming months once its trade team is in place to identify modification in the DSU or needed elements of a General Council decision, the EU has been sending signals that it may be willing to address core U.S. concerns which could lead to the resolution of a core WTO Member concern — the existing impasse on getting the Appellate Body refunctioning.

There is an additional major trade dispute between the U.S. and the EU dealing with the application of additional tariffs on steel and aluminum products following Commerce investigations under Section 232 of the Trade Expansion Act of 1962, as amended, and action by President Trump. It is less clear what the off ramp for the parties is here. The EU and a number of other WTO Members have WTO disputes pending panel reports that will be released at the earliest in the second half of 2021. Similarly, the U.S. has disputes with the EU and others who imposed duties on U.S. exports allegedly because countries were treating the national security law used by the Trump Administration as essentially a safeguard law. Decisions in those cases are now due in the second half of 2021. The EU would like the U.S. to simply terminate the duties. There are steel using industries that support such possible action. However, the global excess capacity problems created by China and others in steel and aluminum remain and have no obvious solution particularly in light of China’s refusal to address the massive capacity increases in the sectors which has destabilized global markets. U.S. steel companies, primary aluminum producers and workers support maintaining the duties.

But all in all, the United States in the first weeks of the Biden Administration is working to reengage multilaterally and to see if there are solutions available to resolve a range of long standing conflicts. USTR during the Trump Administration did an admirable job in identifying and documenting problems with WTO dispute settlement and providing approaches under U.S. law to deal with vexing problems where multilateral approaches were not progressing or were inadequate. The Biden Administration has the opportunity now to hopefully find solutions that work for America and restores greater cooperation in Transatlantic relations. With the efforts being made by the Biden Administration, one is seeing interest within the EU to resolve all or many of the major disputes with the U.S. and work on pressing issues of interest to the EU and the U.S. including.recovery from the pandemic, climate change, WTO reform and more.

Better transatlantic relations is an important element in moving the global economy forward in ways that reflect democratic and market-based principles. Let’s hope that win-win solutions are possible on the existing challenges so long delayed momentum on existential issues can be generated.

WTO dispute settlement — Airbus-Boeing disputes have provided an additional end of year complication

With both the United States and the European Union authorized to retaliate against the other for failure to conform subsidy practices for large civil aircraft after WTO dispute settlement proceedings and with both parties having retaliated in fact, an additional complication arose on December 30 as the U.S. Trade Representative’s Office announced a recalculation of products to be retaliated against to account for a difference in time periods used by the EU and the U.S. for purposes of determining the value of retaliation on particular products. The U.S. had used data from 2019, a time period prior to the pandemic. The EU used a later period (August 2019-July 2020) when U.S. exports were significantly lower to the EU. The U.S. has announced that it has changed its time period basis for retaliation to the same period used by the EU which will increase the number of products that are subject to retaliation. The U.S. also has questioned the inclusion/exclusion of the United Kingdom from the data calculations by the EU (reflecting the withdrawal of the U.K. from the EU). The USTR press release is embedded below and is followed by the USTR notice of changes that will take effect on January 12, 2021. The Federal Register notice will presumably be published next week.

New product coverage focuses on products from France and Germany, the two EU countries with the largest subsidies covered by the dispute.

United-States-Modifies-Tariffs-on-EU-Products-in-Large-Civil-Aircraft-Dispute-_-United-States-Trade-Representative

USTR-FR-notice-of-modification-of-retaliation-in-Large-Civil-Aircraft

The magnitude of the difference in trade retaliation rights based on time period selected can seen from the following table which looks at U.S. imports for consumption and U.S. domestic exports for the EU (28) and EU (27, i.e. without the U.K.) for 2019 and for August 2019-July 2020 periods.

US imports for consumption from
EU 282019$513,449,346,890
Aug.2019-July 2020$473,458,093,801
EU 272019$450,201,525,558
Aug.2019-July 2020$417,877,196,969
U.S. domestic exports to
EU 282019$294,061,637,287
Aug.2019-July 2020$269,762,656,101
EU 272019$233,492,691,463
Aug.2019-July 2020$213,758,315,511

Obviously which numbers or combination of numbers one uses to measure retaliation against during a pandemic can make a significant difference in the level of products retaliated against in fact. The U.K.’s departure from the EU adds it own level of complexity to the situation. With the U.S. and EU reportedly engaged in looking for a resolution of the long running disputes, the upping of U.S. retaliation to match what the U.S. perceives was the approach pursued by the EU will complicate the search for an acceptable solution. It may also complicate the start of the Biden Administration’s trade efforts vis-a-vis the European Union.