U.S. & EU should iron out differences over subsidies to aircraft manufacturers: USTR

In a significant development, in an interview, U.S. Trade Representative Robert Lighthizer stated the United States and Europe should agree to be on the same page and collaborate in opposing any future “hurtful” subsidies used by China to build up its commercial aircraft industry.

Highlighting the growing need to update and revise World Trade Organization rules, Lighthizer said he was working to settle a more than a decade old dispute between Brussels and Washington over government subsidies to aircraft manufacturers, and expressed frustration over current WTO rules which do not prevent future subsidies by the European Union or China.

“If this plays out, they can start a new subsidy tomorrow, and drag out that litigation for five or six years, and there’s nothing under the WTO that you can do about it at all,” said Lighthizer in a rare interview. He has made several proposals to settle the matter before the Trump administration leaves office on January 20.

“In every proposal I’ve made, I’ve said we have to have a clause that says, that whatever we agree to, if China starts to do massive subsidies in this area and it’s hurtful, we have to be able to work together to solve that problem,” said Lighthizer.

The comment addresses what many trade experts have long regarded as the end game of the more than a decade long dispute, which a transatlantic deal could mitigate to curb future subsidies by China in its fast-growing aerospace industry.

The WTO has ruled against every past use of government loans to develop new airplanes, but has not outlawed future subsidies.

EU and U.S. negotiators have been engaged in intensive talks about ending the dispute over government aid to Europe’s Airbus, which is politically backed by Britain, France, Germany and Spain, and U.S. aid to planemaker Boeing.

On Wednesday, Emily Haber, Germany’s ambassador to the United States urged quick action to resolve the dispute, calling it a distraction from larger issues that require urgent joint action including tackling the pandemic, and climate change.

According to sources, Washington’s proposal to repay the damages has been rejected by EU negotiators. One of the ways to settle the dispute could be to bypass the WTO and instead enter into a bilateral dispute settlement mechanism that could be modeled on the system adopted in its U.S.-Mexico-Canada trade agreement, said a source.

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