April 19, 2021, © Leeham News: There appears to be progress in resolving the 16 year long trade dispute between Airbus and Boeing. Finally.
The dispute officially is between the European Union and the United States. But neither political entity would have pursued a dispute but for complaints by Boeing and Airbus.
No recap of the trade dispute is required for LNA readers.
The US imposed about $264m in tariffs on Airbus aircraft imported into the US since 2019. Another $34m in tariffs were imposed on aircraft parts and components. Airbus A320s/321s assembled in Mobile (AL) were exempt from tariffs until late last year. The Trump Administration began imposing tariffs on fuselage, wing and other components imported from the EU then.
The World Trade Organization finally authorized the EU to impose tariffs on Boeing aircraft imported into the EU in October last year. Because of the Boeing 737 MAX grounding and the delay in recertification by the EU’s EASA regulator until January, no 737s were imported until then. Only a few were imported before the Biden Administration and the EU agreed to a four month suspension of tariffs to negotiate a settlement.
No Boeing 787s were imported into the EU, either from October through March. Boeing suspended deliveries while inspections were made.
The US tariffs applied to nearly $2.4bn worth of airplanes. The tariff rate initially was 10%, increasing to 15% in the final months of the Trump Administration. US content is airplanes isn’t taxed.
Talks throughout the long dispute—such as they were—went nowhere. The US (Boeing) demanded the EU (Airbus) not only cure past illegalities but give up reimbursable launch aid entirely. The WTO eventually ruled RLI isn’t illegal, per se. The below-commercial rates were illegal.
The EU refused the US demand and in turn said talks had to proceed first. Each side claimed that neither side fully satisfied the cures on illegal subsidies.
There is a larger concern. The EU and Airbus said a new agreement had to encompass China and Russia. Both countries generously subsidize their commercial aerospace industry. Neither hides nor disputes this fact.
Neither the EU nor US have been willing to press the issue, however, for fear of offending China. (Why not go after Russia hasn’t been explained.)
A former Boeing CEO of Commercial Airplanes explains that since none of the Chinese COMAC C919 orders were done on a competitive basis—they are dictated by the government—there is no way to know what the purchase prices are.
Maybe, but the state subsidies are clear.
More to the point, since in any given year, 25% or more of Boeing’s deliveries were destined for China, this probably had more to do with giving the subsidies a pass. The same is true for Airbus.
Resolving the EU-US dispute is in everyone’s interest. The Biden Administration is the first since President George W. Bush was in office to seriously pursue a resolution.
It’s long overdue.