US-EU Droop Massive Civil Plane Tariffs And Take Goal At China In Framework Addressing Non-Market Practices – Worldwide Regulation


US-EU Suspend Large Civil Aircraft Tariffs And Take Aim At China In Framework Addressing Non-Market Practices

21 June 2021

Husch Blackwell LLP

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The United States and European Union (“EU”) 
announced a ”
cooperative framework” to address and potentially resolve
their long-running dispute over large civil aircraft subsidies,
also commonly known as the 
Airbus or Large Civil Aircraft disputes.  Originally
initiated in 2004 when the U.S. filed a case at the World Trade
Organization (“WTO”) against the EU alleging illegal
subsidies to Airbus SE, the Large Civil Aircraft dispute is the
longest running dispute at the WTO.  As part of the new
understanding, the U.S. and EU will suspend their respective
WTO-authorized tariff countermeasures, which affected a total value
of $11.5 billion in trade.  The U.S.-EU’s announcement is
a major step towards potentially resolving the 17-year
transatlantic dispute over aircraft subsidies.

previously reported, the initial duties occurred in October
2019 when the U.S. imposed 15 percent tariffs under Section 301 of
the Trade Expansion Act of 1962 on imports of civil aircraft and
aircraft parts (under the HTSUS codes 8802.40.0013, 8802.40.0015,
8802.40.0017, 8802.40.0019, and 8802.40.0021).  A rate of 25
percent was adopted by the U.S. for all other listed EU-origin
imports, covering agricultural products, spirits, and luxury goods
among other products.  The EU 
retaliated in November 2020 with tariffs on approximately
$4 billion worth of U.S. imports, with matching rates of 15 percent
for civil aircraft and aircraft parts and 25 percent for all other
U.S.-origin imports, covering agricultural products and industrial
and finished goods.

As part of the Understanding on a cooperative framework
for Large Civil Aircraft, the US and EU expressed their
intention to:

  • Establish a Working Group on Large Civil Aircraft led by each
    side’s respective Minister responsible for Trade, which will
    meet every 6 months or on request,
  • Provide financing to large civil aircraft producers only on
    market terms,
  • Provide R&D funding through an open and transparent process
    and make the results of fully government funded R&D widely
    available, to the extent permitted by law,
  • Not to provide R&D funding as well as specific support
    (such as specific tax breaks) to their own producers that would
    harm the other side,
  • Collaborate on addressing non-market practices of third parties
    that may harm their respective large civil aircraft
  • Continue to suspend application of their countermeasures, for a
    period of 5 years, avoiding billions of euros in duties for
    importers on both sides of the Atlantic.

According to statements made by U.S. Trade Representative
(“USTR”) Katherine Tai, the tariffs would remain
suspended as long as the terms of the agreement are upheld and
while they work on addressing issues including outstanding
subsidies already paid.

The U.S.-EU cooperative framework also includes an “Annex
on Cooperation on Non-Market Economies” to “more
effectively address the challenge posed by non-market
economies” in the civil aircraft sector.  These
cooperative steps include coordinating and exploring information
sharing regarding cybersecurity and other concerns, screening of
inward and outward investments, and “joint analysis of
non-market practices,” especially China’s, in the large
civil aircraft sector.  USTR Tai described the agreement as
“a model we can build on for other challenges” related to
“the threat from China’s non-market practices.”

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