WTO Panel Recommends EU Remove Certain Airbus Subsidies
On June 30, 2010, a World Trade Organization dispute settlement panel issued its report in the long-running dispute brought by the U.S. on “European Communities and Certain Member States - Measures Affecting Trade in Large Civil Aircraft” (DS316, aka the Airbus dispute).
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Both the Office of the U.S. Trade Representative and the EC Trade Commission issued press releases on the dispute, each claiming certain victories. (Note that a separate WTO panel ruling regarding possible U.S. subsidization of Boeing is expected in a few weeks.)
Panel Rules Against Certain EU Launch Aid & Subsidies, Accepts Others
The panel ruled that certain launch aid and member state financing provided by Germany, Spain and the United Kingdom for the Airbus 380 were export subsidies, which are prohibited under WTO rules.
Likewise, the panel ruled that numerous other EU measures were “specific subsidies,” which are also prohibited under WTO rules. These include certain launch aid and member state financing provided to Airbus, certain grants by Germany and Spain for the construction of manufacturing facilities; equity infusions provided by the French government; the lengthening of a specific runway; certain loans provided by Spain; etc.
However, the panel ruled against several U.S. arguments that other launch aid and other measures provided by the EU constituted export subsidies or specific subsidies. For example, the panel found that the U.S. failed to establish that certain launch aid provided for the Airbus 340, 330 and other models were export subsidies. In addition, the panel found that the U.S. failed to establish that various loans, infrastructure improvements, and other measures were specific subsidies.
Prohibited Subsidies Displaced U.S. Exports, but Did Not “Injure” U.S. Industry
Where the panel did conclude that certain EU measures were prohibited export subsidies or specific subsidies, it determined that the effect of these measures was to displace similar U.S. exports into the EU and into certain third countries (Australia, Brazil, China, Chinese Taipei, Korea, Mexico, and Singapore1). The panel concluded that effect of these measures constituted serious prejudice to the interests of the U.S. within the meaning of the WTO Subsidies and Countervailing Measures (SCM) Agreement.
However, the panel did not agree with U.S. arguments that the subsidies significantly undercut prices of like products in the U.S., lead to significant price suppression, or caused injury to the domestic industry in the U.S. under the meaning of the SCM Agreement.
Recommends EU Remove Measures Found to be Subsidies within 90 Days
The panel recommends that the subsidizing EU Member Countries granting each subsidy found to be prohibited withdraw it within 90 days after the panel report is adopted. The panel does not offer any suggestions concerning steps that might be taken to implement its recommendation.
Both U.S. and EU Point to Their Victories
In a press release and statement on the ruling, the USTR states that the WTO panel found that European governments have provided Airbus approximately $15 billion dollars (face value) in launch aid -- subsidizing every model of aircraft ever produced by Airbus in the last 40 years.
According to USTR, the panel confirmed that launch aid and other subsidies significantly distorted the launch decisions Airbus made, and found that but for the subsidies, none of the Airbus aircraft models would have been launched when they were, and certainly not with the same features. USTR Kirk adds that this landmark panel report should be a strong signal to the European Union and the member states to refrain from future launch aid disbursements.
For its part, the EC Trade Commission states that the WTO panel found that European support did not result in any job losses in the U.S. or lost profits to the U.S. aircraft industry. It notes that the WTO panel rejected the allegation that support for Airbus caused "material injury" to the U.S. aircraft industry and found that EU support did not damage Boeing’s pricing or profitability and did not lead to a loss of jobs at the company. Finally, the EC states that the panel’s findings on the economic effects of Airbus’ funding on the US aircraft industry are limited.
Each Side Has 30 Days to Appeal, EC Open to Negotiated Solution
The EC states that the parties now have up to 30 days to decide whether or not to appeal the findings of the report. The EU adds that it remains committed to a negotiated outcome to the dispute with no pre-conditions on either side.
1For India, the panel found that the subsidies constituted a “threat” of serious prejudice.
(See ITT’s Online Archives or 06/23/05 news, 05062322, for BP summary of USTR seeking comment on the Airbus, Boeing WTO disputes.)