EU Looks past Trump to defuse Transatlantic trade conflict

The European Union is working on a proposal for the incoming Biden administration on a new trade relationship, including settling a longstanding aircraft dispute that has seen the allies impose tariffs on $11.5 billion of each other’s exports, according to people familiar with the matter.

The EU is in discussions with member states affected by the conflict, including Germany and France, over how to resolve the issue of illegal aid both sides provided to Airbus SE and Boeing Co., said the people, who asked not to be identified because preparations are ongoing.

The proposal from the European Commission, the bloc’s executive, would seek to cover the broader trade relationship with the U.S., not just the aircraft dispute, one of the people said.

“The EU continues to advocate for a negotiated settlement on all civil aviation matters,” Sophie Dirven, a commission spokeswoman, said in an emailed statement. “We are looking forward to engaging constructively with the new U.S. administration to resolve this long-lasting dispute as part of a renewed transatlantic agenda. We are in constant contact with the member states on this matter.”

The move comes as the EU prepares to move past the presidency of Donald Trump, a period when transatlantic relations plumbed new lows. Over the past four years, the two sides have threatened punitive trade actions over issues from digital taxes to steel imports, while the U.S. has undercut key European priorities like the Paris Agreement on climate change and the Iran nuclear accord.

The goal of any settlement would be to roll back U.S. and European aircraft subsidies in return for the elimination of tariffs on Boeing and Airbus aircraft as well as an array of unrelated sectors such as wine, olives, tractors and video games that have suffered collateral damage.

The dispute dates back to 2004 when the U.S. lodged a World Trade Organization case against the EU for its members’ state support to Airbus. The EU responded a year later with its own complaint that alleged the U.S. unfairly subsidized the development of Boeing aircraft.

In 2019, the WTO authorized the U.S. to retaliate with tariffs against $7.5 billion worth of annual EU exports, and in October the EU won permission to hit back with duties on $4 billion of American products.

Attempts to reach a settlement stalled after the U.S. widened tariffs against European aircraft, wine and spirits on Dec. 30.

Tariff Truce

While Biden has been silent on the issue, his nominee for Secretary of State, Tony Blinken, has previously called for patching up transatlantic relations and ending Trump’s “artificial trade war” with Europe.

Meanwhile, the EU has signaled that it would welcome a removal of the tit-for-tat tariffs by both sides as part of efforts to reach a negotiated settlement.

In early December the bloc’s trade commissioner, Valdis Dombrovskis, held out the prospect of a resolution to the dispute that would see the punitive measures removed.

“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.