The U.S. and European Union reached an agreement Tuesday to bring an end to the long-running dispute over aircraft subsidies as well as a five-year suspension of retaliatory tariffs that impact agricultural trade.
The deal, Ag Secretary Tom Vilsack told lawmakers, “certainly will be good news for American agriculture.”
The EU tariffs being suspended range from 15% to 25% on U.S. wheat, orange juice, cotton, grapefruit, almonds, walnuts, cheese, vodka and other products.
“Today’s announcement resolves a longstanding trade irritant in the U.S.-Europe relationship,” U.S. Trade Representative Katherine Tai said Tuesday after days of intense negotiations in Brussels that culminated in a meeting between Tai and European Commission Executive Vice President Valdis Dombrovskis. “Instead of fighting with one of our closest allies, we are finally coming together against a common threat.”
The World Trade Organization ruled in 2019 the U.S. had the right to hit EU nations with $7.5 billion in tariffs over Europe’s Airbus subsidies. The WTO ruled in October last year that the EU could hit the U.S. with $4 billion in tariffs to punish the U.S. for subsidizing Boeing.
Both Tai and Dombrovskis offered assurances that although the deal is a five-year agreement it would eventually become permanent.
Nevertheless, Tai also stressed that the deal depends on future cooperation and success.
“These tariffs will remain suspended so long as EU support for Airbus is consistent with the terms of this agreement,” she said. “Should EU support cross a red line and U.S. producers are not able to compete fairly and on a level playing field, the United States retains the flexibility to reactivate the tariffs that are being suspended.”
Under the deal, the U.S. and EU agreed to set up a framework that includes a “Working Group on Large Civil Aircraft” that will cooperate on ways to support aircraft companies that both Washington and Brussels agree upon.
The U.S. and EU both suspended retaliatory tariffs surrounding the aircraft subsidy disputes in March for an interim four-month period to allow for negotiations and that pause has already boosted U.S. agricultural exports.
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The pause in EU tariffs has already resulted in a resumption of U.S. hard red spring wheat exports to countries like Spain, Italy and Portugal, according to U.S. Wheat Associates Vice President of Policy Dalton Henry.
“We got caught in the retaliatory tariffs,” Henry said. “That’s a 25% tariff. Wheat is a high-volume, low-margin, bulk grain business, so a 25% tariff pretty well stops us in our tracks. It certainly stopped any new sales after the tariffs were announced.”
But U.S. sales of HRS wheat to Europe started back up quickly after the pause in tariffs was implemented in March, he said.
The more permanent halt to the tariff is expected to be a relief for HRS producers.
“It’s always been a market that flies a bit under the radar, but it’s especially important to our HRS growers – largely in the Dakotas and Minnesota,” Henry told Agri-Pulse.
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