Is the trade dispute between America and Europe over Airbus and Boeing over?
IT IS THE longest trade dispute in the history of the World Trade Organisation (WTO) and its predecessors. America and the European Union have been fighting for 17 years over subsidies provided to Boeing, an American planemaker, and its European arch-rival, Airbus. On June 15th, amid the hubbub of President Joe Bidens first trip to Europe, America and the EU signed an agreement to prevent the dispute, and the associated retaliatory measures, from escalating into a broader trade war. Two days later America and Britain, where some Airbus factories are based, agreed on a similar deal. The Economist Today Hand-picked stories, in your inbox A daily email with the best of our journalism Sign up  The battle began in 2004, the year after Airbus first overtook Boeing in aircraft deliveries. America ripped up a previous understanding on subsidies for large civil aircraft manufacturers after Boeing complained that its rival unfairly received what grew to become $22bn in repayable launch aid to develop new airliners. Airbus and the EU soon hit back with their own claim, stating that Boeings commercial operations had benefited from generous military contracts as well as tax breaks worth $24bn. The WTO eventually ruled in the two parallel cases that both firms had received illegal subsidies. In 2019 it awarded America the right to slap tariffs worth $7.5bn on European goods. It also gave the EU the right to impose tariffs worth $4bn on American products ranging from planes to Harley-Davidson motorcycles. The dispute has dragged on for two main reasons. The first is the sheer complexity of the case. It has taken the WTO much longer to work out whether subsidies robbed each party of aircraft orders than it would have done to rule on the average trade case. This is because the market for airliners is so different from the sort of commodity goods, such as steel or aluminium, that trade cases are usually fought over. The second was the determination of the two sides to push litigation at the WTO as far as possiblea sign of how strong the lobbying power of Airbus and Boeing used to be. A deal only became a serious possibility after the election of Joe Biden, who is keen to strengthen Americas alliance with Europe in the face of threats from China and Russia. Both countries have taken advantage of 17 years of bickering between America and Europe to dish out subsidies of their own worth tens of billions of dollars, helping national champions develop jets to take on Airbus and Boeing. Even so, the deal defers the dispute rather than ending it. The retaliatory tariffs arising from the WTO litigation will be suspended for five years. State financing on market terms (ie, broadly on borrowing terms available from private-sector lenders) for the development and production of airliners will still be allowed, while a working group led by American and European trade ministers attempts to reach a final understanding about past and future subsidies. It is a sign that neither side appears to believe that large commercial aircraft can ever be built on fully commercial terms. But the two sides remain far apart on what exactly counts as market terms and what a final agreement on subsidies should look like. Without any detailed rules on what handouts are and arent allowed, the efforts of China and Russia to build planes to compete with Airbus and Boeing will continue unhindered this decade. That certainly was not the outcome that America and Boeing were seeking when they started the dispute in 2004.