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AGENDA POINT 1: EUROPEAN COMMUNITIES AND CERTAIN MEMBER STATES – MEASURES AFFECTING TRADE IN LARGE CIVIL AIRCRAFT
A. Recourse by the United States to Article 7.9 of the SCM Agreement and Article 22.7 of the DSU (WT/DS316/42)
• We take note of the decision of the arbitration panel in this dispute, and the level of possible countermeasures.
• This decision marks another milestone in the 15-year long aircrafts saga. We will reach another milestone of this saga with the upcoming decision in the arbitration proceedings in the Boeing-case.
• We will say more about the bigger picture later, but this report warrants a closer look. And what we see in there raises serious concerns. Having reviewed the report, we are compelled to observe that we disagree with the report on the basis of which the US has put forward its request today.
• In this respect, we note, in particular, the following:
- First, there is no analysis whatsover in the report of the amount of benefit or the alleged price effects. The alleged volume effects are largely based on the assumption that Airbus or its products should not exist. Notably, we are told that, without the measures, the A380 would never have been launched. This conclusion is at odds with the facts and evidence and does not accurately reflect the prior findings by the Appellate Body. The USTR assertion - in the press release issued upon the publication of the award - which claims that “the Appellate Body agreed that ‘[w]ithout the subsidies, Airbus would not have existed ... and there would be no Airbus aircraft on the market. ’ has no basis in the Appellate Body rulings previously adopted in the course of this dispute.
- Second, awarding recurring annual countermeasures for an indefinite period in response to non-recurring measures, the benefit and adverse effects of which are constantly diminishing, is a breach of the rule foreseen in the SCM Agreement that countermeasures must be commensurate with the degree and nature of adverse effects, and contradicts the existing case law.
- The award of recurring annual countermeasures is all the more striking with respect to the A380 even though the adjudicator knows that the A380 programme has been terminated. This ignores the principle of representativeness, leads to countermeasures that are not commensurate with the adverse effects, and contradicts to the Members' long-held view - which was confirmed by the US itself during the proceeding - that compliance obligations are prospective only.
- Third, the award disregards the risk of over-counting resulting from cumulating nullification or impairment from both orders and deliveries at the same time. This disregards the basic principles of economic valuation and again leads to countermeasures that are not commensurate with the adverse effects.
- Fourth, the award contains a finding that the hypothetical impedance associated with the six country markets where impedance was found coincides with the total number of aircraft  that Airbus sold in those markets, without any effort by the United States to substantiate that assertion.
- Fifth, the award systematically avoids taking into account the treaty terms that
refer to the "non-subsidised like product", which clearly support the view that the volume effects of competing subsidies cancel each other out.
• In DS353 the European Union has already obtained multilateral findings that the United States is out of compliance with respect to both Washington State tax subsidies and FSC. It is currently pursuing its own Article 22.6 DSU proceedings against the United States in DS353. With respect to the same issues, the same principles will be applied in that case. From a systemic point of view, in order to provide security and predictability to the multilateral trading system, and not least for the sake of procedural fairness, that is the only acceptable course to follow.
• Unlike the United States, the European Union has made a substantial further effort to comply that is currently under consideration by a second compliance panel. The result of that proceeding will shortly be known. The European Union will be insisting that, as a matter of law, the outcome of that proceeding is fully and immediately reflected in the level of sanctions imposed by the United States.
• Finally, we have taken very careful note of the arbitrator's repeated and heavy reliance on the proposition that, as long as the defending Member is "out of compliance", because they do not have a multilateral determination of compliance, or a mutually agreed solution, or an unconditional and unequivocal acknowledgement of compliance from the complainant, the full amount of any retaliation remains due.
• We recall in this respect that the possibility of a “multilateral determination of compliance ” will be at serious risk in the very near future in the absence of a functioning multilateral dispute settlement system, and the United States bears the responsibility if that situation were to materialise.
• The content of this report demonstrates why the existence of appeal review on legal issues is essential within the WTO system. We are continuing to review the report and we fully reserve all our rights to challenge its findings at the appropriate time and in the appropriate forum. Unlike the United States, we well-understand that, even if we strongly disagree with the report that forms the basis of the US request, we cannot prevent the DSB from granting authorization to suspend concessions or other obligations consistent with this award, absent a DSB decision by consensus to reject the request, because that authorization will be granted automatically or by operation of law (that is, ipso jure). Nevertheless, we wish to re-state that we disagree with the content of the decision, including for the reasons outlined above. We will monitor very closely the application of the US countermeasures and call on the US to respect the level authorized by the WTO.
• In conclusion, let me reiterate: we remain of the view that even if the US obtains authorisation from the DSB today, opting for applying its countermeasures now would be short-sighted. Both the EU and the US have been found at fault by the WTO dispute settlement system. In the parallel Boeing case, the EU will in some months equally be granted right to impose additional countermeasures. The mutual imposition of countermeasures, however, would only harm global trade and the broader aviation industry.
• As we have consistently stated, we remain ready to work with the United States on a fair and balanced solution for our respective aircraft industries. Pending progress in finding such a solution, and while reserving our rights in this regard, it is not our intention to seek reporting from the United States with respect to any of the above matters.