USA, Great Britain suspend tariffs and seek to dissolve rows of aircraft

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© Reuters. A bottle of Bowmore single malt scotch whiskey is pictured in a shop near Lausanne

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By William James and Andrea Shalal

LONDON / WASHINGTON (Reuters) – The United States has agreed a four-month suspension of retaliatory tariffs on British goods such as scotch whiskey through a longstanding streak of subsidies for aircraft, with both sides pledging to use the time to settle the dispute.

The US administration under former President Donald Trump had imposed tariffs on a number of European Union foods, wines and spirits, including Scotch whiskey, which the industry said had threatened its future.

As a former EU member, Great Britain is a party to the dispute.

“The UK and United States are embarking on a four-month tariff suspension to unburden the industry and take a bold joint step to resolve the longest-running disputes in the World Trade Organization,” said a joint statement.

“This will give time to focus on negotiating a balanced dispute settlement and seriously addressing the challenges posed by new entrants in civil aviation from non-market economies such as China.”

The tariff ceasefire differs from the broader US-UK talks on a post-Brexit trade deal, but sends a positive signal to those discussions.

Britain and the United States were hoping for a trade deal before the US federal government’s express-granting authority, granted by Congress in July, expired.

To meet this deadline, US trade officials would have to inform Congress of their intention to seal a deal sometime in April.

AIRBUS

The billion dollar tariff dispute between the United States, the European Union and Great Britain, which left the EU at the end of 2020, relates to a longstanding dispute over state subsidies for the aircraft manufacturers Airbus and Boeing (NYSE :).

Airbus spokesman Clay McConnell welcomed the suspension of what he called “loose-lose tariffs” and said the company supported all efforts to reach an agreement.

Airbus builds wings and other parts in the UK, but assembles its commercial aircraft in the EU.

No comment was immediately available from Boeing.

Ivan Menezes, CEO of Diageo (LON :), the maker of Johnnie Walker and Talisker whiskey, said a permanent solution would help secure thousands of jobs in Scotland and the rest of the UK.

ALLIED

The Duty Removal Agreement is temporary and only applies to UK goods. According to a US administrative officer, US tariffs still apply to EU goods.

A UK official described it as a “real win” justifying a UK decision to deviate from EU post-Brexit policy and drop tariffs in hopes of reaching an agreement with the Trump administration before leaving.

At the time, the EU questioned whether Britain had the legal right to maintain these tariffs after leaving the bloc.

Talks between the UK and the United States on an agreement centered on the issue of aircraft subsidies were ongoing but ended abruptly in January, according to a source familiar with the matter.

“I am pleased to say that our American allies – under their new president and his hard-working staff at the US Trade Representative – have welcomed our move towards a fair solution,” she said.

President Joe Biden’s best trade candidate, Katherine Tai, will be approved by the Senate next week.

She told the Senate Finance Committee last month that Washington had completed four rounds of negotiations with the UK since talks began. She said she would make it a priority to resolve the longstanding aircraft subsidy dispute.

The United States’ Distilled Spirits Council welcomed Thursday’s decision but said it was disappointed that UK tariffs would continue to be applied to US whiskey in the context of a separate dispute over steel.

Tai, when asked if she would prioritize a deal with the UK, told the committee in written responses to questions posted this week that the UK was “an important trading partner and ally”.

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