China’s state-sponsored aerospace manufacturer, Commercial Aircraft Corporation of China, completed the first public flight test of its passenger airliner in 2017, and is fast becoming a rival to both Boeing and Airbus in global aircraft construction. Also, China’s airlines are state-run, and Beijing can order them to buy domestically built planes, squeezing market share for Boeing and Airbus.
The United States and the European Union would work together, Ms. Tai said, “to challenge and counter China’s nonmarket practices in this sector in specific ways that reflect our standards for fair competition.”
In a post-summit news conference, Ms. Tai explained: “For almost 20 years we have been at each other’s throats, fighting each other in terms of competition between our industries. While we have been engaged in this fight, others are taking the opportunity to launch their own industries, and we have been too busy fighting each other to pay attention.”
But she cautioned that the agreement set limits on the subsidies that the European Union would be allowed to provide to Airbus, warning that the United States would reimpose billions of dollars in tariffs if subsidies by European Union countries crossed a “red line.”
“These tariffs will remain suspended, so long as E.U. support for Airbus is consistent with the terms of this agreement,” she said. “Should E.U. support cross the 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.”
The agreement means that significant punitive tariffs estimated at $11.5 billion, on a wide variety of products including wine, tractors, spirits, molasses and cheese, will continue to be suspended after both sides had agreed to do so in March while they tried to settle the dispute.
The dispute between Airbus and Boeing over illegal state subsidies goes back nearly two decades. In 2019, the World Trade Organization ruled that the European Union had illegally provided support to Airbus, clearing the way for Washington to respond with tariffs worth up to $7.5 billion in annual trade.