WTO PANEL ISSUES COMPLIANCE REPORT ON US CHALLENGE TO EU AIRCRAFT SUBSIDIES
October 10, 2016
On September 22, 2016, the World Trade Organization (WTO) determined that the European Union, along with France, Germany, Spain and the United Kingdom, failed to comply with a 2011 Appellate Body decision that faulted European governments for providing $22 billion worth of illegally subsidized financing to cover costs for the development of a number of Airbus aircraft.
In its complaint, the United States maintained that the European Union and certain Member States failed to comply with the Dispute Settlement Body (DSB) recommendations and rulings for two main reasons. First, that the European Union and certain Member States failed to act in conformity with the obligation to “take appropriate steps to remove the adverse effects,” or “withdraw the subsidy,” because not only do the subsidies found to have caused adverse effects in the original proceeding continue to cause adverse effects today, but also because by agreeing to provide Airbus with Launch Aid/Member State Financing (LA/MSF) (for Airbus’ A350XWB), France, Germany, Spain and the United Kingdom caused “additional adverse effects” to the United States’ interests as it “continued and even expanded” the subsidization of Airbus’ Large Civil Aircraft (LCA) activities. Second, the United States claimed that France, Germany, Spain and the United Kingdom failed to comply with the recommendations and rulings adopted by the DSB because, according to the United States, the Airbus A350XWB LA/MSF measures are prohibited export and/or import substitution subsidies within the meaning of Articles 3.1 and 3.2 of the SCM Agreement – claims the United States also made in relation to the Airbus A380 LA/MSF subsidies.
The decision is significant in that it opens a path for the U.S. to implement trade sanctions against the EU.
The Compliance Report is available at: https://www.wto.org/english/tratop_e/dispu_e/316abrw_e.pdf
If you have any questions, please contact Evelyn Sahr (esahr@eckertseamans.com, 202-659-6622) or Drew Derco (dderco@eckertseamans.com, 202-659-6665).
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