AFP Issues Statement on Removal of Tariffs from Airbus-Boeing Dispute

ARLINGTON, Va.—Americans for Prosperity (AFP) today issued the following statement from Dan Pearson, AFP Trade Policy Fellow, on the Biden administration’s decision to suspend tariffs previously imposed on a number of UK products stemming from the Boeing-Airbus dispute. The suspension will last four months while the countries attempt to resolve the matter:

“It is encouraging to see the Biden Administration provide relief from these tariffs. In addition to the benefits Americans will experience from this move, we are hopeful this will lead to a lasting settlement of the dispute between the US and the UK and EU. Freer trade increases individual freedom, creates economic opportunities, and leads to better standards of living. Now more than any time since 1932, removing trade barriers is in the best interest of the United States, and we support efforts to continue opening markets and ending costly trade wars.”

IIRC, the tariffs were imposed because Airbus receives government subsidies, which pays all of their R*D costs!

Boeing does not receive government subsidies, and the Boeing/Airbus “subsidy” argument has raged ever since Airbus was created in 1970.

The argument is that Airbus is able to sell its manufactured items MUCH cheaper than Boeing (and other competing US manufacturers) because the government subsidies significantly reduce Airbus’ manufacturing cost.

“IIRC, the tariffs were imposed because Airbus receives government subsidies, which pays all of their R*D costs!”

To be fair, much of the Boeing 707 was a derivative of an air force tanker program. Having spent 33 years in the defense business, I can attest that a lot of things are not as they seem. As a society, we continuously benefit from money the government spent. Microcircuits, pacemakers and the internet are all good examples. The government pays, say, General Electric to develop a new turbine blade material for a jet engine project. That material finds its way into every new engine made, but without the amortization cost of the development. How do you calculate something like that?

Another issues the US has private medical insurance which is partly paid by the employer. This is a huge cost that companies like Mercedes and Toyota do not have. So, because medical costs for employees of Mercedes and Toyota are paid by the government, is that a subsidy? I would argue yes, if I was GM.

On the other hand, if the Canadian government charges significantly less for the lumber on government land than does the US, is Canada subsidizing their lumber industry? That was the Trump administration’s assertion last November when they slapped a tariff on imported Canadian lumber. That is the reason that the average price of a new house has increased $14,000. (That’s the number I read. A contractor I dealt with said it was closer to $30,000.) Incidentally, the tariff was to be a short term incentive for Canada to negotiate. For reasons unknown, but probably because other issues intervened, nothing has been done. Nor, does it appear there is anyone in the Biden administration who wants to negotiate. (That’s what one Canadian source reported.)

Many of these issues are not an overt attempt by a government to subsidize their industry, but simply the difference in the way their system works compared to ours. Now, China, is a different kettle of fish. Their system is designed to employ people without any regard to the cost of an item. As a result, much of their industry is very inefficient, but on purpose. This has damaged practically every company in the Western world. Frankly, for that and because of their slave labor camps, I would forbid any products from China whatsoever. (Walmart executives would probably have conniptions.)

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