UK and US settle long-running Airbus-Boeing trade dispute

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The UK has reached a truce with the US in a long-running dispute over commercial aircraft subsidies for Airbus and Boeing, agreeing to a five-year suspension of punitive tariffs on a wide range of goods including Scotch whisky and Stilton cheese.

The deal comes after the EU reached a similar settlement with the US in a 17-year dispute over support for their respective aircraft manufacturers, as they seek closer co-operation to deal with China’s model of state capitalism.

The agreement, which followed talks in London on Wednesday between UK international trade secretary Liz Truss and US trade representative Katherine Tai, will extend an earlier suspension of the punitive tariffs by both countries, which affected UK exports to the US worth £550m.

Post-Brexit the UK needed to reach a separate agreement with Washington in what was originally a dispute between the EU and US. Britain is one of the four European partner nations that built Airbus into the main rival to US aircraft maker Boeing, alongside France, Germany and Spain. The UK remains the centre of Airbus’s wing manufacturing operation.

The UK had already unilaterally suspended the punitive tariffs on US goods in the hope of smoothing the path for a trade deal with Washington after Brexit. But a US trade deal looks a distant prospect as the Biden administration has made clear that the US domestic economic agenda is the priority.

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Officials in Brussels had argued the UK had lost the right to apply punitive tariffs to US goods in the dispute anyway because the World Trade Organization ruling that authorised them was awarded to the EU.

The US suspended its tariffs on both UK and EU goods in March, committing to a four-month suspension while both sides negotiated a longer-term arrangement. 

In a joint statement, the two countries said the development would strengthen their “special relationship” and build on the “revitalised Atlantic Charter, which affirms our ongoing commitment to sustaining and defending our enduring values against new and old challenges”.

The UK could now focus on “taking its trading relationship with the US to the next level”, Truss said.

Tai said the two sides would now focus on addressing challenges from China and other non-market economies.

The US had targeted UK products, including single-malt Scotch whisky, cashmere and Stilton cheese. As a member of the EU, the UK had applied tariffs to US goods including sugarcane molasses, casino tables, fitness machines and rum.

The Scotch Whisky Association welcomed the deal. It said the industry had lost more than £600m in exports to the US over the past two years due to the 25 per cent punitive tariff on single malt.

The US deal with the UK mirrors that struck with the EU. London and Washington will set up a ministerial working group to discuss subsidy limits for aircraft manufacturers. The deal also commits both sides to making sure research and development funding to aircraft makers will not harm the other side. They will also commit to work together to tackle “non-market practices of third countries that may impact on their large civil aircraft industries”. 

Both Boeing and Airbus have repeatedly said they wanted to reach a settlement. The two companies are wary of the rising threat from China, where state-owned aerospace manufacturer Comac is preparing to launch a narrow-body airliner to compete with the A320 and 737, Airbus’s and Boeing’s biggest sellers. Western executives fear that in the long term they could lose important export sales to Chinese airlines, which are big customers of both companies.

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