The United States will temporarily lift punitive tariffs on £ 550million of UK exports such as Scotch whiskey and Stilton cheese, imposed in a dispute with the EU over subsidies to Boeing and Airbus, in the goal of defusing one of the longest exchanges. conflicts in modern history.
The movement follows the UK unilateral decision to suspend tariffs against the United States from January 1, which surprised Brussels and Airbus. Brussels disputed that the UK had the right to act unilaterally in a trade dispute between the EU and the US when it left the bloc.
Liz Truss, UK secretary for international trade, said she was delighted US President Joe Biden agreed to suspend tariffs on British goods for four months. This move would help improve transatlantic relations, she said.
The US trade representative’s office has confirmed that it will temporarily suspend tariffs, to allow time to negotiate a settlement of the air dispute.
The Johnson government has come under heavy criticism over tariffs, especially from the Scotch whiskey industry, whose exports to the United States fell 30% last year.
“The easier it is for Americans to buy a bottle of Macallan, Talisker or Glenmorangie, the more these producers will need to invest in their businesses, their people and their future,” Truss said. “Trade equals jobs.”
The dispute over aircraft subsidies between the United States and the EU is one of the oldest cases in the history of the World Trade Organization, reflecting the importance of the industry on either side and the intense competition between Boeing and Airbus.
The battle dates back to 2004, the year after Airbus first overtook its American rival in terms of deliveries. Both sides were found guilty of providing billions in illegal subsidies to their aircraft manufacturers.
Brussels was given the go-ahead from the WTO last year to impose tariffs of up to 25% on $ 4 billion of U.S. goods, after Washington announced tariffs on $ 7.5 billion of European imports.
Boeing and Airbus welcomed any initiative that could help bring the two sides closer together. “We welcome the USTR (US Trade Representative) decision to suspend tariffs to allow negotiations to take place,” Airbus said in a statement. “Airbus supports all actions necessary to create a level playing field and continues to support a negotiated settlement of this long-standing dispute to avoid losing tariffs.”
Boeing said: “We welcome this action by the US and UK governments, creating an opportunity for serious negotiations to resolve the aviation dispute at the WTO. A negotiated settlement will allow the industry to move forward with a truly level playing field globally for aviation. “
However, Britain’s departure from the EU has raised questions about the effectiveness of a UK-US suspension. With no precedent to follow, trade lawyers said it was not clear whether the UK still has the right to impose or suspend tariffs granted to the EU.
Whitehall officials have insisted the UK has the right to revoke retaliatory tariffs. A person familiar with the process said: “This whole issue shows the benefit of being an independent trading nation. . . if we can achieve this, it paves the way for a deeper trading relationship with the United States and will aid in the negotiations of free trade agreements.
Despite this, there appear to be very few signs of progress in the US-UK trade negotiations. In January, White House press secretary Jen Psaki indicated that reaching a deal would not be a priority for the Biden administration.
Last month, Biden-appointed trade adviser Katherine Tai told senators she would “review the progress” of talks that had taken place between the two sides over the previous two and a half years.
The EU and the US have long advocated for a resolution to the dispute, but have remained far removed from the terms of any agreement on how to finance the development of new aircraft.
After Biden’s election as President of the United States, there was a feeling in Europe that a deal might be within reach. There was growing speculation that the talks were moving forward.
However, at the end of December, the United States even higher rates on European products, specifically targeting French and German products.
The EU said it was in intensive talks with the United States with the aim of quickly reaching an agreement to remove the punitive tariffs.
“We have proposed that the two sides agree to suspend tariffs for six months,” said a spokesperson for the European Commission. “This will help restore confidence and confidence, and thus give us the space to reach a comprehensive and lasting negotiated solution.”
A U.S. administration official said that while he could not say whether there are plans to remove EU tariffs imminently, the Biden team is continuing to review the dispute. “The aim is to resolve the dispute and create a level playing field,” the official said.
Brussels and Washington are well aware that the rules must be set before China becomes a major competitor of Boeing and Airbus.
China is expected to be the fastest growing market for commercial aircraft over the next several decades, and Beijing has made breaking the global duopoly a strategic priority in an attempt to claim part of that market for Chinese industry. Later this year, China’s Comac is expected to have fully certified its first major commercial aircraft, the C919 single-aisle.