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The US and Europe have agreed to suspend tariffs for five years on a range of goods from cheese to alcoholic drinks as they seek a permanent solution to a 17-year dispute over aircraft subsidies.

Joe Biden’s administration has taken a proactive approach to end the dispute related to subsidies for Boeing and Airbus aircraft. In March, the US president suspended tariffs for four-months on British goods such as Stilton cheese and pork following a similar post-Brexit move by the UK in January.

In 2019, the European Union was hit with 25% tariffs imposed by Biden’s predecessor Donald Trump, including the UK because it was still then part of the trading bloc, on a host of products, with food featuring heavily, such as cheese and butter, frozen meats, sausages, fruits and pasta. In beverages, Scotch whisky and coffee were also impacted.

On Tuesday (15 June) it emerged that the European Commission’s executive vice president Valdis Dombrovskis and US trade representative Katherine Tai had “reached an understanding” during a meeting in Brussels.

“Both sides will now seek to overcome long-standing differences in order to avoid future litigation and preserve a level playing field between our aircraft manufacturers and will also work to prevent new differences from arising,” a statement issued by the Commission read.

Dombrovskis said in the same statement: “With this agreement, we are grounding the Airbus-Boeing dispute. It proves that the transatlantic relationship is now moving to the next level, and that we can work with the US on tackling long-running disputes. We now have time and space to find a lasting solution through our new Working Group on Aircraft, while saving billions of euros in duties for importers on both sides of the Atlantic.”

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By GlobalData

The EC noted US countermeasures in the Airbus case affected 19 product categories, including aircraft, wines and spirits, dairy and cheese or machinery, valued at US$7.5bn, with 15% tariffs applied on aircraft and 25% on non-aircraft products.

Conversely, EU measures related to Boeing affected 130 categories, including aircraft, nuts, tobacco, spirits, handbags and tractors, valued at $4bn. Tariffs were 15% on aircraft and 25% on non-aircraft products.

Moving forward, “the two sides will continue discussions to operationalise their intentions regarding financing, research and development funding, as well as specific support of large civil aircraft”, according to the statement.

The CNBC news channel reported trade representative Tai as saying the “announcement resolves a long-standing trade irritant in the US-Europe relationship.”

In a separate statement, Tai said both sides “now have time and space to find a lasting solution through our new Working Group on aircraft, while saving billions of euros in duties for importers on both sides of the Atlantic”.

FoodDrinkEurope, the trade body representing EU manufacturers in food and beverages, issued a reactionary statement, saying: “This is positive news for EU food and drink manufacturers and supply chains who in recent years have become collateral damage for a dispute originating in a completely unrelated sector, and will contribute to restoring more stable trade relations with our transatlantic partner.

“We encourage both sides to maintain the current positive momentum and spirit of cooperation, to permanently remove retaliatory tariffs on agri-food products, and strengthen transatlantic relations.”

The dispute is regarded as the longest in the history of the World Trade Organization. It dates back to 2004 when the US filed a case at the WTO against the EU, arguing that the bloc was illegally subsidising Airbus. The EU then filed a counter-complaint against the US in May 2005 for its unlawful support to Boeing.