LDN - Business

Cheer over Boeing, Airbus deal belies cracks in EU, U.S. trade relationship

[June 16, 2021] By Andrea Shalal

WASHINGTON (Reuters) - A deal for a five-year ceasefire in a U.S. and EU dispute over aircraft subsidies on Tuesday reflected progress, but the underlying trade relationship remains fragile with many unresolved disagreements, diplomats and trade experts said.

The two economic powers agreed to set aside tariffs on $11.5 billion in U.S. and EU goods hit during the subsidy battle over Boeing Co and Airbus SE aircraft, to focus on fighting China's clear ambition to build and sell its own commercial aircraft.

But the United States warned it could re-impose tariffs "if we’re no longer competing on a level playing field." That warning relates to the big outstanding differences over taxation of big American tech firms; steel and aluminum tariffs and reforms of the World Trade Organization, experts said.

The fact that the two sides failed to hammer out a permanent solution to the aircraft subsidy dispute, after months of optimistic noises from senior officials, showed how deep their differences run.

"It's not as good as what it could be or should be," said one diplomatic source of the five-year hiatus. "They've essentially kicked this into the long grass."

Tensions are also fraught because the Biden administration has moved slowly to review tariffs and other policies introduced by former President Donald Trump. Some European diplomats are frustrated. Many key roles at the U.S. Trade Representative's office remain unfilled, complicating negotiations.

STEEL AND ALUMINUM ROW

At the summit, Washington and Brussels also agreed to discuss U.S. tariffs on EU steel and aluminum imports before the end of the year and address excess capacity in the overall market, notably from China. But prospects for an agreement on rescinding the tariffs looked slim.

U.S. steel industry groups and unions are urging the Biden administration to keep in place the 25% steel and 10% aluminum tariffs imposed three years ago under Trump.

The U.S. tariffs affect 6.4 billion euros of EU metal exports. The European Commission, which wants them removed is challenging the U.S. tariffs at the WTO.

One senior U.S. trade official told reporters on Tuesday that the issue would be "difficult" to resolve.

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A worker adjusts European Union and U.S. flags at the start of the 2nd round of EU-US trade negotiations for Transatlantic Trade and Investment Partnership at the EU Commission headquarters in Brussels November 11, 2013. REUTERS/Francois Lenoir/File Photo

A EU official said Washington refused point blank to agree to lift the steel and aluminum tariffs by Dec. 1, but said U.S. officials acknowledged that the issue was "something that creates tensions and that needs to be addressed."

In a conciliatory move, the European Commission, which oversees EU trade policy, last month suspended a June 1 doubling of retaliatory tariffs on Harley-Davidson Inc motorbikes, U.S. whiskey and motorboats for six months, and refrained from taxing more U.S. products.

APPLE, FACEBOOK, GOOGLE

The United States is pushing for an agreement on a global minimum corporate tax, which could help move along multilateral negotiations over digital taxation.

But Washington told France, Italy and others that they face other tariffs if they implement domestic digital services taxes, which Washington says unfairly target U.S. companies, if no international consensus is reached.

U.S. officials have also expressed deep concern about draft rules announced by the EU that would require U.S. tech companies like Alphabet Inc's Google, Apple Inc and Facebook Inc to provide far more information, including about takeovers, according to an administration source.

WTO PATENT WAIVERS AND REFORMS

EU officials are still smarting after Washington's abrupt decision to support a temporary waiver of intellectual property rights at the World Trade Organization to help speed production of COVID-19 vaccines.

They said Washington has failed to engage fully on reviving the WTO Appellate Body, its dispute settlement mechanism, after it was essentially dismantled by the former Trump administration.

"We are not really yet seeing a full engagement on the issue," said one EU official, adding that the Biden administration was still reflecting "on what to do."

(Reporting by Andrea Shalal and Phil Blenkinsop; Editing by Heather Timmons and Cynthia Osterman)

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