'Negotiation or Retaliation'... US-EU Aviation Dispute Enters New Phase After 16 Years of Trade Conflict

WTO Approves $4 Billion Retaliatory Tariffs Against US for EU
Negotiations Expected Instead of Tariffs... WSJ Calls It a Choice Between Talks or Trade War

[Asia Economy Reporter Kwon Jae-hee] The World Trade Organization (WTO) has recognized the U.S. government's subsidies to American aircraft manufacturer Boeing as a violation of international trade regulations and approved retaliatory tariffs worth $4 billion (4.59 trillion KRW) annually for the European Union (EU). This marks a new turning point in resolving the 16-year-long trade dispute between the U.S. and Europe over aircraft. Since the WTO approved retaliatory tariffs worth $7.5 billion against the U.S. on behalf of the EU last year, the EU has expressed its intention to pursue negotiations rather than impose tariffs.

According to the Wall Street Journal (WSJ) on the 13th (local time), the WTO granted the EU the authority to impose retaliatory tariffs worth $3.99 billion annually, ruling that the U.S. government illegally subsidized Boeing. The EU can now impose additional tariffs not only on Boeing aircraft but also on other American imports such as blueberries, tractors, sweet potatoes, and peanuts.

This ruling is notable as it provides a breakthrough in resolving the trade dispute between the U.S. and the EU that has lasted for 16 years. The conflict over aircraft subsidies between the two sides, which began in 2004, is considered the longest dispute case in WTO history. When Airbus first surpassed Boeing in shipment volume, Boeing challenged the EU's aircraft subsidies and demanded retaliatory tariffs worth $22 billion. The EU responded by requesting the WTO to allow it to impose retaliatory tariffs worth $23 billion on the U.S., claiming that the U.S. government also illegally subsidized Boeing.

The WSJ evaluated, "This decision forces both sides to end years of lawsuits and counter-lawsuits and choose between negotiation and trade war."

While both sides have mixed feelings about the ruling, they are leaning toward negotiations. The EU welcomed the WTO's decision and stated it would not immediately retaliate with tariffs. Valdis Dombrovskis, EU Commissioner for Trade, said, "We want to avoid measures and responses that harm each other and resolve the issue through negotiations with the U.S." However, he also hinted at the possibility of imposing tariffs, saying, "If that does not happen, we will have no choice but to protect our interests and respond appropriately."

Guillaume Faury, CEO of Airbus, also expressed a desire for a smooth agreement, stating, "It is time to find a solution so that tariffs on both sides of the Atlantic can be lifted."

The U.S. also emphasized resolving the issue through amicable agreement. Robert Lighthizer, U.S. Trade Representative (USTR), said, "Since the U.S. government's subsidies to Boeing have already been eliminated, there is no legal basis for imposing tariffs," but added, "The U.S. wants to resolve this through negotiations with the EU to restore a level playing field."

Industry insiders are placing weight on the possibility of active negotiations. This is because Russia and China are penetrating the civil aircraft market, which is dominated by Boeing and Airbus, using aggressive subsidies as a weapon. Cooperation between the U.S. and Europe has become more urgent than ever. Additionally, with the aviation industry still depressed due to COVID-19, imposing tariffs is seen as disadvantageous to both sides.

AFP news agency optimistically forecasted, "The U.S. and the EU will open the door to negotiations."

This content was produced with the assistance of AI translation services.