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US-China tensions

US and EU bury the hatchet on aircraft subsidies to focus on China

Beijing-backed plane manufacturer makes inroads amid protracted feud

European Commission President Ursula von der Leyen, left, and U.S. President Joe Biden meet in Brussels on June 15. Biden attended a NATO summit the day before.   © Reuters

BRUSSELS/WASHINGTON -- The U.S. and the European Union agreed to end a 17-year dispute over aircraft subsidies amid broader efforts to repair cracks left in the trans-Atlantic alliance by the Trump administration to counter an increasingly assertive China.

The truce, involving the suspension of tariffs, was announced at a meeting Tuesday between U.S. President Joe Biden met with European Commission President Ursula von der Leyen and European Council President Charles Michel in Brussels.

"Today, with the agreement on Boeing-Airbus, we have taken a major step in resolving the longest trade dispute in the history of the WTO," von der Leyen said in a statement.

The U.S. and the European Union have been fighting parallel cases over government assistance to Boeing and Airbus at the World Trade Organization since 2004, and enacted tit-for-tat tariffs as trade tensions flared under former U.S. President Donald Trump.

Under Biden, the two sides in March agreed to suspend the tariffs for four months while they discussed a solution. On Tuesday, they agreed to pause them for another five years and create a working group devoted to the issue.

Now the alliance aims to focus on countering anti-competitive practices by China. The state-run Commercial Aircraft Corp. of China, or COMAC, receives generous subsidies from Beijing. Unease across the Atlantic had risen on fears the protracted feud between Washington and Brussels would only benefit COMAC and other Chinese players seeking to wrest market share from Boeing and Airbus.

"We have committed to meaningful cooperation on countering investments in the aircraft sector by non-market actors in our economies to acquire technology know-how, and also outward investments into China that are made pursuant to non-market forces," U.S. Trade Representative Katherine Tai told reporters on Tuesday.

The U.S. and the EU also agreed to create a new Trade and Technology Council in order to boost cooperation on issues ranging from research and development to regulation.

Specifically, the leaders are looking to create regulatory frameworks on artificial intelligence and other cutting-edge technologies, as well as cybersecurity and digital privacy. The EU and the U.S. "want to discuss how we avoid new unjustified technical barriers and how to cooperate in areas with high potential from our economy," von der Leyen said afterward.

The enhanced regulatory cooperation would prevent leaks and foreign acquisitions of critical technology companies. The idea is to work together to reshape supply chains for semiconductors and critical minerals in response to widespread disruptions to the supply of electronics parts, medical equipment and other products due to the coronavirus pandemic.

The high-profile meeting comes amid mounting concerns over China's push for global technological supremacy. The two sides are trying to build supply chains that exclude Chinese companies. The alliance will work with like-minded countries including Japan and Canada to create international rules through the WTO.

Ahead of the EU meeting, Biden on Monday attended a NATO summit, where China again figured prominently.

"China's stated ambitions and assertive behavior present systemic challenges to the rules-based international order and to areas relevant to Alliance security," the NATO leaders said in their joint communique. They further agreed on the NATO 2030 agenda -- a plan to reform the bloc to better meet emerging threats over the coming years.

Biden described NATO's principle of collective defense as a "sacred obligation." The principle is enshrined in Article 5 of NATO's founding treaty, which states that all allies must help defend any ally that comes under attack.

"I just want all of Europe to know that the United States is there," he said. He signaled his confidence in bilateral ties, which had cooled under the Trump administration over demands for greater defense spending and other issues.

NATO leaders in their communique said that attacks in space "could lead to the invocation of Article 5."

But despite the thaw in U.S.-EU relations, the two sides remain apart on certain issues.

For example, while the EU has escalated its criticism against China over human rights concerns, the bloc is hesitant to jeopardize economic ties with Beijing.

Meanwhile, the U.S. has slammed EU antitrust authorities for what it characterizes as the unfair targeting of U.S. tech giants. The Trump administration imposed additional tariffs on European steel and aluminum, triggering retaliatory restrictions from the EU.

Still, the Biden administration has maintained a focus on protecting employment at home as part of the president's drive for a foreign policy for the middle class. With U.S. steelmakers and a key union urging for continued tariffs on EU steel, the administration faces a difficult choice.

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