After 15 years of discord, the dispute between Boeing (US) and Airbus (EU) over who benefits most from illegal subsidies is entering the final round. The World Trade Organization (WTO) has to now verify the amount of countervailing measures that the United States is entitled to impose on EU export to the US as a result of the EU subsidies to Airbus. Stephenson Harwood’s international trade group member, Michael Papadakis, reports on the proceedings to date.
On 6 October 2004, the US requested consultations with the Governments of Germany, France, the United Kingdom, and Spain (the “Member States”), and with the EU concerning measures affecting trade in large civil aircraft (LCA). This triggered a long investigation process and assessment of the US allegation of illegal subsidies to Airbus.
Please click here to view the WTO timetable setting out the history of the dispute.
The WTO’s Appellate Body upheld the Dispute Settlement Panel’s finding that the United States appropriately defined product markets for LCA, namely, the global markets for single-aisle LCA, twin-aisle LCA, and very large aircraft (VLA). With regard to subsidies existing in the post-implementation period, the Appellate Body found that:
(i) in the twin-aisle and VLA LCA markets, the Panel’s findings support the conclusion that the identified sales represent “significant lost sales” to the US LCA industry which were the effect of the existing LA/MSF subsidies; and
(ii) the “product effects” of the existing LA/MSF subsidies are a genuine and substantial cause of impedance of US LCA in the VLA markets in the EU, Australia, China, Korea, Singapore, and the United Arab Emirates.
On the basis of the WTO decision, the US can now impose countervailing duties on EU exports to the US to compensate/balance the harm the subsidies to Airbus had raised over the years. Click here for relevant press coverage.
The Commission responded on behalf of the EU stating that they have taken into account the WTO decision in the Airbus subsidies case and the level of the possible countermeasures/countervailing duties. The Commission urged the US not to take measures highlighting that in a few months the EU is due to win their challenge against the US subsides to Boeing and be granted the right to impose countermeasures against the US as a result of its continued failure to comply with WTO rules. The EU already published a preliminary list of US products to be considered for countermeasures last April.
The Commission stressed that the mutual imposition of countervailing measures would only inflict damage on businesses and citizens on both sides of the Atlantic, and harm global trade and the broader aviation industry at a sensitive time. The Commission also reminded the US of the EU’s approach to the US and its offer to work with them on a fair and balanced solution for their respective aircraft industries.
The list of the specific that the US proposes to target can found here.