U.S. and EU Announce Cooperative Framework to Settle Longstanding WTO Large Civil Aircraft Dispute

On June 15, 2021, the United States and the European Union (EU) announced a “cooperative framework” to resolve their decades-long World Trade Organization (WTO) dispute involving alleged subsidies in the large civil aircraft industry supporting both Boeing and Airbus. U.S. Trade Representative Katherine Tai stated, “Our goal was clear – to forge a new, cooperative relationship in this sector so that our companies and our workers can compete on a more level playing field. The agreement includes a commitment for concrete, joint collaboration to confront the threat from China’s non-market practices, and it creates a model we can build on for other challenges.” The cooperative framework includes:

• A Working Group on large civil aircraft led by each side’s respective “minister” responsible for trade. The Working Group will meet on request or at least every six months; the higher-level trade ministers will meet annually. The Working Group will address any disagreements that may arise and will collaborate on and continue discussing and developing the principles reached in the framework agreement.
• Each side providing “financing to its LCA [large civil aircraft] producer for the production or development of large civil aircraft on market terms.”
• Each side providing “funding for research and development (R&D) for large civil aircraft to its LCA producer through an open and transparent process and [intending] to make the results of fully government funded R&D widely available, to the extent permitted by law. Each side intends not to provide R&D funding or other support that is specific, to its LCA producer in a way that would cause negative effects to the other side.”
• Each side intending “to collaborate on jointly analyzing and addressing non-market practices of third parties that may harm their respective large civil aircraft industries.” To that end, the framework agreement has an annex regarding cooperation on non-market economies so that the United States and EU can share information and more effectively address challenges posed by non-market economies (i.e., China).
• Suspending current WTO-approved retaliatory tariffs for five years, with the expectation that the United States and EU “will contribute to establishing a level playing field and to addressing shared challenges from non-market economies.”
• Continuing to confer on addressing outstanding support measures.

The full text of the framework is available here.

This latest announcement follows the March 2021 temporary suspension of retaliatory tariffs by each side in order to seek a “comprehensive and durable negotiated solution to the Aircraft disputes.” See Update of March 5, 2021. In this longstanding dispute, the WTO Dispute Settlement Body has authorized the EU to impose $4 billion in retaliatory tariffs annually on U.S. products and authorized the United States to impose $7.49 billion in retaliatory tariffs annually on EU products. For additional background on this dispute and the resulting retaliatory tariffs regarding EU subsidies to Airbus and U.S. subsidies to Boeing, see SmarTrade Updates of October 4, 2019, December 9, 2019, February 17, 2020, August 13, 2020, October 15, 2020 and November 11, 2020.