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The UK government has broken ranks with the EU by unveiling plans to suspend punitive tariffs against the United States for aircraft subsidies, in an attempt to pave the way for a post-Brexit trade deal with Washington.
Last month, the EU hit $ 4 billion in US products with tariffs of up to 25 percent in retaliation for illegal state aid to Boeing, the aviation group. The move was the latest round in a 16-year battle over subsidies, one of the longest trade disputes.
It followed last year’s imposition by Washington of tariffs of up to 25 percent on European imports worth $ 7.5 billion into the United States, after the World Trade Organization found that Franco-German aircraft maker Airbus was also had benefited from illegal state aid.
The move by Liz Truss, the UK Commerce Secretary, will be seen as an attempt to win the favor of incoming US President Joe Biden as the Boris Johnson government tries to rekindle its hesitant attempts to strike a trade deal. separated with the United States.
Truss said the UK wanted “to reach a negotiated agreement so that we can deepen our trade relationship with the US.”
However, it has not been clear for weeks whether the UK could have unilaterally kept the aviation-related fees after December 31, given its status as an outgoing EU member.
EU officials said the UK would lose the right to impose punitive tariffs on the US from January 1 anyway, given that the only complainant in the WTO case over Boeing was the EU.
Paradoxically, according to the reading of the situation by EU officials, the US may continue to take action against the UK because Washington launched the Airbus case not only against the EU, but also specifically against Spain, the UK. , Germany and France.
The Financial Times revealed in July that attempts to strike a trade deal between the United States and the United Kingdom in late summer had been abandoned due to sticking points such as Britain’s reluctance to give unlimited access to American agricultural products.
Despite the granting of tariffs, the UK is likely to face a struggle to get the Biden administration to sign on to any potential trade deal.
Biden said last week that he was in no rush to reach new trade deals. “I am not going to sign any new trade agreements with anyone until we have invested heavily here at home, in our workers and in education,” he told the New York Times. “I want to make sure that we are going to fight like hell by investing in America first.”
The UK government said the announcement of the tariffs was part of a strategy to reduce trade tensions “so that the US and the UK can advance to the next phase of their trade relationship” and ultimately draw a line in the damaging dispute.
A person close to the US side of the discussions to resolve the dispute said the move “significantly alters the atmosphere” of the bitter trade war.
If Britain had maintained the tariffs after leaving the trade bloc on December 31, it would have been “a very aggressive gesture,” he said. The UK could now seek a bilateral agreement with the US on what defines a “level playing field” for state aid to the aerospace industry. “It offers the opportunity for the UK and the US to say ‘here’s the way forward.’
A UK official said: “It removes a bilateral irritant and it is a step in the right direction.”
The UK’s position is particularly complicated, given that it is one of Airbus’ partner countries along with France, Germany and Spain, which are subject to the EU’s tariff decisions.
The EU imposed its own punitive levies on the US with some reluctance last month, given its expressed desire to resolve the long-running aviation dispute.
The EU hopes that the arrival of the Biden administration heralds an improved tone in trade relations between the EU and the US, including in the area of commercial aircraft.
Boeing and Airbus have repeatedly said they want a negotiated agreement to define new rules to finance aircraft development. The two companies are well aware that China is preparing to launch its own state-funded jets in commercial markets.
However, they remain deeply divided on the issue of financial backing from governments. Boeing executives have already started asking questions about support programs in France and Germany for new green aircraft.
A Boeing spokesperson said the UK’s decision to suspend “damaging tariffs” would allow us to work with the UK as a global commercial aviation hub. We support a level playing field with free and fair competition in aviation. “
Airbus said its goal was “to find a negotiated settlement of this long-standing dispute to avoid lose-lose fees.”
But Paul Everitt, Head of UK Aerospace Trade Group ADS, said: “We are disappointed that the UK has chosen to take unilateral action without ensuring any reciprocal action to resolve this dispute.
“A negotiated settlement is the best way to achieve a lasting resolution and the governments of the United Kingdom, Europe and the United States must work together to achieve this goal.”
The UK government said it reserved the right to impose tariffs at any time if satisfactory progress was not made towards an acceptable deal.
The Scotch Whiskey Association, which has seen exports to the United States fall by 30 percent last year due to tariffs, welcomed the “encouraging step” from the UK government and called on Washington to reciprocate.
