While most aircraft and parts move around the globe without tariffs, Russia still has substantial tariffs that shield its own recuperating...
While most aircraft and parts move around the globe without tariffs, Russia still has substantial tariffs that shield its own recuperating aerospace industry from Boeing and Airbus.
But Russia wants to become a member of the World Trade Organization during the current round of talks, perhaps as early as next year. Negotiators are trying to pressure it into cutting tariffs as a condition of entry, said Joel Johnson, executive director-international for the Teal Group, a Virginia-based aerospace research group.
Russia won’t accept the zero-tariff rules most industrial countries use, he said. But it may be possible to cut the rate somewhat. “The Chinese went to low single digits,” Johnson said.
As long as Russia is negotiating to join the WTO, “that at least gives us some pressure on them,” he said.
At the same time, Russia’s tariffs are a problem for Aeroflot, the Russian national airline. It pays 25 to 30 percent more for Boeing and Airbus planes than its competitors. “It’s a Catch-22 because it discriminates against Aeroflot,” Johnson said.
Two other aerospace debates also are taking place offstage at WTO.
The U.S. has filed a trade case at the WTO alleging the European Union pays illegal subsidies to Airbus, its rival to Boeing. The case is in the discovery phase, with both sides supplying mountains of data to WTO officials in Geneva. A decision is not expected for months.
Boeing’s orders from identified customers since January 2004 include 237 planes for U.S. buyers and 840 for export.
The EU last year won a separate dispute over taxes, saying the U.S. needed to change the way it refunds tax on overseas sales of jets. The U.S. changed the law but said existing Boeing sales agreements were exempt, because they were negotiated under the old law.
The EU is contesting the grandfathering. However, it’s likely the dispute will die out, Johnson said, because the grandfathering would largely expire in the time it would take to litigate it.