What’s Driving the Boeing vs. Airbus Trade Dispute?

Making airplanes is a prestigious business, testimony to a country’s technical skills, its engineering prowess and aspirations on the world stage. It can be a source of national pride, but also a trade flashpoint. Nothing illustrates this more than the global rivalry of Boeing Co. and Airbus SE, the Coke and Pepsi of the skies. The U.S. and European Union have been fighting over subsidies to their respective aircraft industries for nearly two decades, with many companies on both sides of the Atlantic suffering collateral damage. Now, finally, the two sides have found a way forward -- just as a new potential rival to the planemakers’ duopoly appears on the horizon.

State aid -- the increasingly common practice of governments doling out support to key manufacturers or industries. In 2004 the U.S. lodged a case at the World Trade Organization against the EU for its member state support to Airbus. In 2011 the WTO ruled that the EU provided Airbus with billions of dollars of illegal subsidized financing that enabled Airbus to launch its widebodied and short-haul planes. The EU opened a parallel case against the U.S. that successfully argued Boeing benefited from state subsidies as well as space and military contracts, which defrayed the cost of civilian aircraft development. The cases continued to wind their way through the WTO until 2019 -- when the trade body authorized the U.S. to retaliate with tariffs against $7.5 billion worth of EU exports annually. In October 2020 the EU won permission from the WTO to strike back with annual tariffs on $4 billion of U.S. goods.