The US will temporarily lift punitive tariffs on £550m worth of UK exports such as Scotch whisky and Stilton cheese, imposed as part of a row with the EU over subsidies to Boeing and Airbus, in an attempt to de-escalate one of the longest trade disputes in modern history.
The move follows the UK’s unilateral decision to suspend tariffs against the US from January 1, which took both Brussels and Airbus by surprise. Brussels has disputed that the UK had the right to act unilaterally in a trade dispute between the EU and the US when it has left the bloc.
Liz Truss, UK international trade secretary, said she was delighted that US president Joe Biden had agreed to suspend tariffs on UK goods for four months. The move would help to improve transatlantic relations, she said.
The US trade representative’s office confirmed that it would temporarily suspend the tariffs, to allow time to negotiate on settling the aircraft dispute.
The Johnson government has come under heavy fire over the tariffs in particular from the Scotch whisky industry, whose exports to the US plunged 30 per cent last year.
“The easier it is for Americans to buy a bottle of Macallan, Talisker or Glenmorangie, the more money those producers will have to invest in their businesses, their staff and futures,” Truss said. “Trade equals jobs.”
The US-EU aircraft subsidies dispute is one of the longest-running cases in the World Trade Organization’s history, reflecting the importance of the industry to each side and the intense competition between Boeing and Airbus.
The battle dates back to 2004, the year after Airbus first overtook its US rival in terms of deliveries. Both sides have been found guilty of providing billions in illegal subsidies to their aircraft makers.
Brussels was last year given the green light by the WTO to impose tariffs of up to 25 per cent on $4bn worth of US products, after Washington announced duties on $7.5bn worth of European imports.
Both Boeing and Airbus welcomed any move that could help to bring the two sides together. “We welcome USTR’s (US Trade Representative) decision to suspend tariffs for allowing negotiations to take place,” Airbus said in a statement. “Airbus supports all necessary actions to create a level-playing field and continues to support a negotiated settlement of this longstanding dispute to avoid lose-lose tariffs.”
Boeing said: “We commend this action by the US and UK governments creating an opportunity for serious negotiations to resolve the WTO aircraft dispute. A negotiated settlement will allow the industry to move forward with a genuinely global level playing field for aviation.”
However, Britain’s departure from the EU has raised questions about how effective any UK-US suspension can be. With no precedent to follow, trade lawyers have said it is unclear whether the UK still had a right to impose or suspend tariffs that were granted to the EU.
Whitehall officials insisted the UK had the right to revoke retaliatory tariffs. One individual close to the process said: “This whole issue shows the benefit of being an independent trading nation . . . if we can get this done, it paves the way to a deeper trading relationship with the US and will help free trade deal negotiations.”
Despite this, there appear to be very few signs of progress in the trade talks between the US and UK. In January, White House press secretary Jen Psaki indicated that securing a deal would not be a priority for the Biden administration.
Last month, Biden’s nominated top trade adviser Katherine Tai told senators that she would “review the progress” of the talks that had taken place between the two sides over the previous two and a half years.
Both the EU and the US have long argued for a resolution to the dispute, but have remained far apart on the terms of any agreement on how to fund new aircraft development.
After Biden’s election as US president, there was a feeling in Europe that a deal could be within reach. There has been growing speculation that talks were progressing.
However, in late December, the US further raised tariffs on European goods, specifically targeting French and German products.
The EU has said it is in intensive talks with the US in a bid to quickly secure a deal to remove punitive tariffs.
“We have proposed that both sides agree to suspend tariffs for six months,” a European Commission spokesperson said. “This will help restore confidence and trust, and thus give us the space to come to a comprehensive and durable negotiated solution.”
A US administration official said that while he could not indicate whether there were plans to imminently remove the EU tariffs, the Biden team was continuing to review the dispute. “The goal is to resolve the dispute and create a level playing field,” the official said.
Both Brussels and Washington are keenly aware that the rules need to be set before China becomes a significant competitor to Boeing and Airbus.
China is expected to be the fastest-growing market for commercial aircraft over the coming decades and Beijing has made it a strategic priority to break the global duopoly in an attempt to claim some of that market for Chinese industry. Later this year, China’s Comac is expected to have fully certified its first major commercial aircraft, the C919 single aisle.