The U.S. and European Union (EU) agreed to what was initially reported as a deal on the civilian aircraft dispute between the two over subsidies paid to Airbus in the EU and Boeing in the U.S.
But as more details began to come out about the action, it appears a little more nuanced that just an outright trade deal. Recall that the two sides had already agreed to in March a four-month suspension of the tariffs totaling some $11 billion in total on products traded between the two countries.
There had been little said leading up to the announcement early Tuesday morning other than the two sides were still "hopeful" that an agreement could be reached before the four-month tariff hiatus ended July 11.
But the intensity picked up as President Joe Biden was poised to hold a summit with his EU counterpart, European Commission President Ursula van der Leyen, leading to the initial reports a deal was reached.
Of course, many reports simply characterized the situation as one that was started by President Donald Trump and the tariffs the U.S. hit the EU with after winning their case against Airbus subsidies at the WTO. The two sides tried to negotiate a deal, but the U.S. forged ahead with retaliatory tariffs.
But the dispute was not one that started under Trump. Rather it goes back some 17 years -- to 2004 under the Presidency of George W. Bush. And administration's since then have maintained the U.S. stance that the subsidies provided Airbus did not pass muster relative to EU commitments under WTO. That, of course, spawned a challenge by the EU of what they said were subsidies for the U.S. airplane maker Boeing. Both countries pursued the matters at the WTO and the trade body ruled both were in violation of their trade commitments.
Under WTO rules after appeals are exhausted, if the trade situation is not remedied, then a country can take action against the other with the approval of the WTO. And that is where the Trump administration took the dispute.
"Today's announcement resolves a long-standing trade irritant in the U.S.-Europe relationship," said U.S. Trade Representative Katherine Tai. "Instead of fighting with one of our closest allies, we are finally coming together against a common threat."
That common threat? China. This has been the underlying focus for the Biden administration and the five-year suspension of tariffs agreed to with the EU sets the stage for more cooperation between the two on China.
But on the aircraft dispute, the two agreed to an "understanding on a cooperative framework" that covers two pages and commits the two sides to approach funding and development of large civilian aircraft "on market terms." The also agreed that government research funds for new aircraft programs would be via an "open and transparent process." Any disputes between the two are to handled "though quiet bargaining in a new working group," according to the Washington Post.
Tai called the deal "revolutionary" as it would allow them to focus on China's growth in the commercial aircraft market. But she also admitted that some of the details are yet to be worked out and will be sorted out over those next five years in the new working group.
But before thinking that all is well between the U.S. and EU on the trade front, think again. There are still other disputes that remain, including ones on steel and metals tariffs imposed by the U.S. And that is a topic where countries have been negotiating for some five years without much progress to show.
And there is the matter of digital taxes and border carbon taxes. On the latter, even Tai who declared the two sides would put away their "litigation briefcases" in the aircraft dispute, admitted that the U.S. would reserve its right to retaliate with tariffs if the EU imposed tariffs linked to carbon that the U.S. feels are discriminatory.
So we will see. There is a five-year hiatus on tariffs between the two sides and a general document on the dispute that still has to be finished in the aircraft dispute. Given that there are other still unresolved issues like beef and GMOs with the EU, this aircraft dispute and coming negotiations on metals and digital taxes that need to be monitored very closely, Washington Insider believes.