U.S., EU agree tariff freeze in aircraft dispute, eye China

March 5, 2021 12:22 PM EST

FILE PHOTO: European Commission President Ursula von der Leyen in Brussels, Belgium February 26, 2021. REUTERS/Johanna Geron/Pool


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By Philip Blenkinsop and David Lawder

BRUSSELS/WASHINGTON (Reuters) - The European Union and the United States agreed on Friday to suspend tariffs imposed on billions of dollars of imports in a 16-year-old dispute over aircraft subsidies, and said any long-term solution would need to address Chinese competition.

The two sides said in a joint statement that the four-month suspension will cover all U.S. tariffs on $7.5 billion of EU imports and all EU duties on $4 billion of U.S. products, which resulted from long-running World Trade Organization cases over subsidies for planemakers Airbus and Boeing.

It will ease the burden on industry and workers and focus efforts on resolving the conflict, the statement said.

As well as effective support measures and enforcement, key elements of a resolution would include "addressing the trade distortive practices of and challenges posed by new entrants from non-market economies, such as China," it said.

The suspension followed a telephone call between U.S. President Joe Biden and European Commission President Ursula von der Leyen, officials said.

The White House said Biden had underscored his support for the EU and his commitment to revitalise the U.S.-EU partnership, while Von der Leyen described the accord as excellent news for businesses on both sides of the Atlantic, and a very positive signal for economic cooperation in the years to come.

EU trade chief Valdis Dombrovskis hailed a reset in the EU's relationship with its biggest and economically most important partner.

"Removing these tariffs is a win-win for both sides, at a time when the pandemic is hurting our workers and our economies," he said.

The U.S. tariffs cover EU planes and plane parts, wine and jam from France and Germany, Spanish olives, German coffee, screwdrivers and other tools, and liqueurs, cheese and pork from across the EU.

EU tariff targets include U.S. planes and parts, along with tobacco, nuts, sweet potatoes, rum, vodka, gym equipment, casino tables, tractors and machines used in construction known as shovel-loaders.

The suspension will take effect once official notices are published, expected in coming days.

The tariff suspension will help Boeing as the company resumes deliveries of its 737 MAX in Europe after a 22-month safety grounding ended in January.

"We welcome this step by the EU and the U.S. government and hope it will allow for productive negotiations to finally resolve this dispute and bring a level playing field to this industry," Boeing spokesman Bryan Watt said in an emailed statement.

The Distilled Spirits Council of the United States said the tariff suspension was a "promising breakthrough" but added that it was "extremely disappointed" that a 25% tariff EU tariff on American whiskey, the largest U.S. spirit export, would remain in place as part of a separate trade dispute over U.S. steel and aluminum tariffs.

"I rejoice for our French winegrowers," wrote French Finance Minister Bruno Le Maire in a tweet. "Let us continue on the path of cooperation to find a final agreement. In these times of crisis, it must be time for reconciliation."

Friday's agreement between Brussels and Washington mirrors a four-month tariff suspension agreed on Thursday by the United States and Britain.

Biden and von der Leyen also discussed the COVID-19 pandemic, tackling climate change, and strengthening democracy during their call, as well as China, Russia, Belarus, Ukraine, and the Western Balkans.

(Reporting by Philip Blenkinsop in Brussels and David Lawder and David Shepardson in Washington; Editing by Kirsten Donovan and Rosalba O'Brien)



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