WTO Rejects Vast Majority of US Claims In Airbus Dispute
(Source: European Commission; issued May 15, 2018)
BRUSSELS --- The EU welcomes the report by the Appellate Body in the dispute brought by the US on support to Airbus. The report rejects the vast majority of the US allegations that the EU had not complied with the WTO findings.

The Appellate Body definitively dismissed all US claims that any of the EU support is outright "prohibited" under WTO rules.

Commissioner Malmström said: "Today the WTO Appellate Body, the highest WTO court, has definitively rejected the US challenge on the bulk of EU support to Airbus, and agreed that the EU has largely complied with its original findings. Significantly, it dismissed the vast majority of the US claims that this support had damaged Boeing's aircraft sales. The EU will now take swift action to ensure it is fully in line with the WTO's final decision in this case. Also, we look forward to the upcoming ruling by the Appellate Body on US compliance with the WTO findings of the massive and persistent government support to Boeing."

The Appellate Body found that the majority of EU support to Airbus challenged by the US had expired in 2011. It ruled that under WTO rules the EU is not required to take any further action regarding state support that no longer exist, such as the alleged support for the A300, A310, A320 and A330/A340 aircraft models.

This ruling leaves the EU with only a few remaining compliance obligations in order to bring itself fully into line with WTO rules. These are linked to repayable loans provided to the newer A380 and A350 XWB models. There are no obligations that remain regarding single-aisle aircraft.

The Appellate Body also significantly downgraded the assessment of the economic damage that the remaining EU support has allegedly caused to Boeing's aircraft sales. The US had put forward 218 claims of 'adverse effects' - such as lost sales - to Boeing as a result of alleged support to Airbus. The Appellate Body rejected 94% of US claims and only upheld 14 instances where the support had negatively affected Boeing, related only to the support for the A350 XWB and A380.

The EU will now take swift action to bring itself into line with WTO rules as regards its remaining obligations.

Background

The original WTO case was initiated in 2004. The US challenged support provided by France, Germany, Spain and the UK to Airbus for the development and production of its series of large civil aircraft programmes.

The WTO ruled on the case in 2011, but the US considered that the EU, France, Germany, Spain and the UK had failed to take sufficient steps to withdraw subsidies to Airbus, or remove the economic impact of those subsidies on Boeing. The US therefore brought compliance proceedings against the EU which challenged the European efforts. Today's step marks the end of those compliance proceedings as the Appellate Body is the highest WTO court.

The EU launched a parallel case against US government support for Boeing aircraft in 2005. In that case we are also at the stage of the compliance proceedings after the EU argued before the WTO that the US had not made any efforts to remove its subsidies.

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United States Prevails in Showing EU Subsidies to Airbus Continue to Break WTO Rules
(Source: US Trade Representative; issued May 15, 2018)
WASHINGTON, D.C. --- The Trump Administration today achieved an important victory in its World Trade Organization (WTO) dispute with the European Union (EU) and four of its member States regarding subsidies to Airbus.

In December 2011, the EU claimed to have removed the more than $18 billion in subsidized financing to Airbus that the WTO had previously found to be WTO inconsistent. The United States disagreed and in September 2016, a WTO compliance panel found that the EU had failed to comply, finding that only two of the 36 “steps” the EU claimed to have taken to comply were even “actions.”

The WTO appellate report confirmed today that the United States was correct; the EU remains out of compliance with its WTO obligations.

“President Trump has been clear that we will use every available tool to ensure free and fair trade benefits American workers,” Ambassador Robert Lighthizer said. “This report confirms once and for all that the EU has long ignored WTO rules, and even worse, EU aircraft subsidies have cost American aerospace companies tens of billions of dollars in lost revenue. It is long past time for the EU to end these subsidies. Unless the EU finally takes action to stop breaking the rules and harming U.S. interests, the United States will have to move forward with countermeasures on EU products.”

The appellate report issued today found that EU subsidies to high-value, twin-aisle aircraft have caused serious prejudice to U.S. interests. The report found that billions of dollars in launch aid to the A350 XWB is causing significant lost sales of Boeing 787 aircraft.

The report found that subsidies to the A380 continue to cause significant lost sales of Boeing 747 aircraft, as well as impedance of exports of Boeing very large aircraft to the EU, Australia, China, Korea, Singapore, and UAE markets. In addition, the EU did not appeal findings by the compliance panel that certain regional infrastructure grants cause adverse effects to the U.S. industry.

Additional Background Information

In May 2011, the Appellate Body confirmed that the EU and four of its member States (Germany, France, the UK, and Spain) conferred more than $18 billion in subsidized financing to Airbus and had caused Boeing to lose sales of more than 300 aircraft and market share throughout the world. In fact, in looking at the effect of the EU subsidies, the original WTO panel that first heard the case and the Appellate Body agreed that “[w]ithout the subsidies, Airbus would not have existed … and there would be no Airbus aircraft on the market. None of the sales that the subsidized Airbus made would have occurred.” Nothing in today’s compliance appellate report alters these findings.

In contrast, the WTO rejected the EU assertion in the EU’s counter-complaint that U.S. subsidies were responsible for the viability of Boeing’s large civil aircraft production. A compliance panel found that only a single Washington tax measure was inconsistent with WTO rules, and the United States has appealed that limited finding.

The Boeing Company is the only American producer of large civil aircraft and is the largest single U.S. exporter. Boeing is headquartered in Chicago, IL, and has major facilities around the country, including in Washington and South Carolina. The company employs more than 140,000 people and delivered an industry record 763 commercial aircraft while booking 912 new orders in 2017. Boeing is the largest American manufacturer of commercial jetliners.

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Appellate Body Issues Report on EU Compliance In Airbus Dispute
(Source: World Trade Organisation; issued May 15, 2018)
On 15 May the WTO’s Appellate Body issued its report in the case “European Communities and Certain Member States — Measures Affecting Trade in Large Civil Aircraft — Recourse to Article 21.5 of the DSU” (DS316)

Click here for the Appellate Body’s results page, on the WTO website.


Summary of key findings

On 15 May 2018, the Compliance Appellate Body report was circulated to Members.

A350XWB subsidies:
The Appellate Body upheld the Panel's finding that Airbus paid a lower interest rate for the A350XWB LA/MSF than would have been available to it on the market and, consequently, a benefit was thereby conferred within the meaning of Article 1.1(b) of the SCM Agreement. The Appellate Body also upheld the Panel's finding that each of the French, German, Spanish, and UK A350XWB LA/MSF contracts constitutes a subsidy within the meaning of the SCM Agreement.

Prohibited (import substitution) subsidies:
The Appellate Body agreed with the Panel that the fact that a subsidy results in the use of domestic over imported goods cannot by itself demonstrate that that subsidy is contingent on the use of domestic over imported goods, whether in law or in fact. The Appellate Body dealt with a similar claim in United States — Conditional Tax Incentives for Large Civil Aircraft. Based on its analysis, the Appellate Body upheld the Panel's finding that the United States had failed to establish that the subsidies at issue are prohibited import substitution subsidies. The Panel finding rejecting the claim alleging prohibited subsidies contingent on export performance was not appealed.

Compliance obligation under Article 7.8 of the SCM Agreement with respect to expired subsidies:
The Appellate Body agreed with the European Union that an implementing Member cannot be required to “withdraw” a subsidy that no longer exists, or to “remove” the “effects” of such subsidies that do not exist. The Appellate Body therefore disagreed with the manner in which the Panel characterized the scope of the compliance obligation under Article 7.8 of the SCM Agreement. Rather, having upheld the Panel's finding that certain LA/MSF subsidies had expired before the end of the implementation period on 1 December 2011, the Appellate Body found that the European Union had no compliance obligation with respect to these subsidies. The Appellate Body underscored that the pertinent question for purposes of these compliance proceedings was whether the subsidies existing in the post‑implementation period (i.e. after 1 December 2011) caused adverse effects.

Adverse effects:
The Appellate Body upheld the Panel's finding that the United States had brought its adverse effects claims with respect to appropriately defined product markets for LCA, namely, the global markets for single-aisle LCA, twin‑aisle LCA, and very large aircraft. The Appellate Body then focused its review on the Panel's analysis and findings regarding the effects of the subsidies existing in the post-implementation period, that is, essentially the A380 LA/MSF and the A350XWB LA/MSF subsidies.

The Appellate Body disagreed with the European Union's claim that the Panel erred in its analysis regarding the "product effects" of these subsidies, that is, the effects of these subsidies on Airbus' ability to bring the A380 and A350XWB to the market as and when it did. Rather, in the Appellate Body's view, the Panel's findings, as well as relevant findings from the original proceedings, establish that the LA/MSF subsidies existing in the post-implementation period made it possible for Airbus to proceed with the timely launch of the A350XWB and to bring to market the A380, and that both events were crucial to renew and sustain Airbus' competitiveness in the post‑implementation period.

The Appellate Body subsequently considered whether the “product effects” of the LA/MSF subsidies existing in the post-implementation period, in light of the competition in the relevant product markets as determined by the Panel, supported the conclusion that the LA/MSF subsidies caused adverse effects in the form of significant lost sales, displacement, and impedance of US LCA.

Conclusion:
Based on its review of the Panel's analysis, the Appellate Body ultimately upheld the Panel's conclusion that insofar as significant lost sales in the twin-aisle markets (in which Airbus and Boeing sell the A330, A350XWB, 767, 777, and 787 product families) and significant lost sales and impedance in the very large aircraft markets (the A380 and 747) are concerned, the European Union had failed to comply with the recommendations and rulings of the DSB in the original dispute because the underlying subsidies continued to exist and cause adverse effects. The Appellate Body, however, did not uphold the Panel's findings of displacement in these two markets or its finding of impedance in the twin-aisle market. With regard to the market for single-aisle aircraft (in which the A320 and Boeing 737 compete), the Appellate Body observed that the Panel's findings concerned primarily the effects of subsidies that had expired before 1 December 2011 (the time by which the European Union had been required to comply with the recommendations and rulings of the DSB in the original dispute). The Appellate Body was not convinced that the Panel's analysis in this regard provided a sufficient basis to find that subsidies provided to Airbus continued to cause adverse effects in the market for single-aisle aircraft.

On this basis, in respect of subsidies existing in the post-implementation period, the Appellate Body upheld, albeit for different reasons, the Panel's conclusions that “{b}y continuing to be in violation of Articles 5(c) and 6.3(a), (b) and (c) of the SCM Agreement” insofar as the twin-aisle LCA and VLA markets are concerned, “the European Union and certain member States have failed to comply with the DSB recommendations and rulings and … the obligation under Article 7.8 of the SCM Agreement ‘to take appropriate steps to remove the adverse effects or … withdraw the subsidy’”; and that, “{t}o the extent that the European Union and certain member States have failed to comply with the recommendations and rulings of the DSB in the original dispute, those recommendations and rulings remain operative.”

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WTO Decision on Repayable Advances Granted to Airbus
(Source: French Government; issued May 15, 2018)
(Issued in French; unofficial translation by Defense-Aerospace.com)
The Appellate Body of the World Trade Organization (WTO) has just rendered its decision in the dispute initiated by the United States in 2004 against repayable advances granted to Airbus by France, Germany, Spain and the United Kingdom (Case DS316).

France takes note of this decision, which rejects the vast majority of US allegations against the support granted to Airbus and which definitively confirms that such aid is not prohibited by WTO law. The Appellate Body further recognizes that the European Union has been in full compliance with a very large majority of the recommendations made by the WTO in 2011.

Regarding the few remaining issues, France, in conjunction with the European Commission and committed to compliance with international trade rules, confirms its intention to meet its international commitments by adopting new compliance measures in the near future.

This dispute must be paralleled with the one initiated at the WTO in 2005 by the European Union concerning several fiscal measures as well as certain American research support schemes whose spin-offs directly benefited Boeing (case DS353). Previous WTO decisions in this case have all confirmed the US government's massive and ongoing support for Boeing aircraft. France will pay close attention to the Appellate Body's decision in 2019 which will determine whether the United States has taken adequate steps to comply with the ruling condemning them in 2012

France reaffirms its commitment to the WTO rules that make it possible to make the rule of law prevail and the multilateral regulation of the different in commercial matters.

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