The EU says it has resolved its 17-year conflict over aircraft subsidies with the United States. Yahoo Finance’s Oscar Williams-Grut shares the details.
AKIKO FUJITA: A big breakthrough in trade between the US and the European Union this morning. The two sides announcing a resolution in a 17-year dispute over aircraft subsidies. Let's bring in Oscar Williams-Grut for the very latest on this. And Oscar, so much of this is really in the context of trying to counter China. 17 years, but it looks like the two sides, at least for now, say this thing is resolved.
OSCAR WILLIAMS-GRUT: That's right, Akiko. And they've explicitly named China in the communications about this agreement, despite the fact that ostensibly it doesn't have anything to do with them. Now, just to refresh everybody's memory, this is a dispute that, as you say, has been going on for 17 years. It began in 2004 when the US filed a case against the EU at the World Trade Organization, accusing it of giving illegal subsidies to Airbus.
The EU then counter claimed in 2005, saying the US was doing a similar thing with Boeing. Now this has been going on for years and years, and both sides have levied tariffs against each other totaling more than $10 billion. Today they said those tariffs would be suspended for an initial period of five years. Both sides have also agreed not to provide any more subsidies that can be seen as being unfair on the other counterparty in terms of competition.
Now this comes, of course, after the G7 Summit of Leaders last week. European Commission President Ursula von der Leyen, who was at that meeting, said that this was a major step in resolving one of the longest trade disputes in the history of the WTO and said it showed a new spirit of cooperation between the EU and the US. Part of that is to do, of course, with Joe Biden, who's taking a more conciliatory approach when it comes to working with allies.
Biden, for his part, said that China played a significant part in this. He said that we agreed to work together to challenge and counter China's nonmarket practices in this sector that give China's companies an unfair advantage. Essentially it seems the president has said the enemy of my enemy is my friend. It's better to work with the EU and try and build closer alliances, bury the hatchet on matters like this, and try and counter China's influence.
Now China, of course, similarly uses billions in subsidies to support its airline industry. And trade bodies in the EU last year pushed China to try and stop that. That's just one area of the economy, of course, where China uses state subsidies, an area that many in the West see as unfair.
Now the tariffs have been suspended for five years, suggesting that this is not completely over. But if things continue on the path where they are now, you would expect that they would again extend that suspension or indeed drop tariffs altogether once we reach the end of that five-year term. Shares in both Airbus and Boeing ticked up today on the back of this announcement.
AKIKO FUJITA: Oscar Williams-Grut breaking down that decision for us or at least that agreement for us Thanks so much.