WTO Airbus Ruling Contains ‘Serious' Legal Errors, EU Says

International Trade Daily™ provides rapid, reliable notification of the most significant developments affecting U.S. trade and international business policy, as well as the policies of major U.S....

By Bryce Baschuk

Oct. 26 — The European Union said the World Trade Organization committed several “serious errors” when it found that EU member states failed to eliminate billions of dollars of illegal subsidies for the European aircraft consortium, Airbus Group SE.

The EU urged the WTO to reverse, modify or declare moot six key aspects of the Sept. 22 compliance ruling, which faulted the EU for continuing illegal loans and other financing schemes provided to Airbus (185 ITD, 9/23/16).

The breadth of the EU's appeal will likely prevent U.S. trade officials from pursuing retaliatory trade tariffs against the EU until 2017 at the earliest.

The U.S. claims that Europe's illegal subsidies to Airbus amounted to $22 billion and annually costs the U.S. tens of billions of dollars in lost exports.

Six-Point Appeal

The EU appeal outlines six specific aspects of the WTO compliance ruling where Brussels' believes the WTO either misinterpreted, misidentified or improperly assessed the EU's financial assistance schemes as illegal subsidies.

Specifically, the EU said the WTO:

  •  misinterpreted the WTO Agreement on Subsidies and Countervailing Measures (SCM) by requiring the EU to remove the effects of a subsidy that no longer exists;
  •  failed to determine whether the EU had withdrawn its subsidies for a pair of German airport facilities in order to comply with a previous ruling;
  •  inaccurately assessed whether launch aid loans and member-state financing for the A350XWB aircraft qualified as subsidies under the SCM agreement;
  •  misidentified the relevant product markets when evaluating the adverse effects that the EU's subsidies had upon Airbus' American competitor, the Boeing Co.;
  •  erred in determining whether the U.S. must demonstrate that it did not subsidize the Boeing airplanes that were harmed by the European subsidies; and
  •  failed to account for the passage of time and events that occurred between the prior use of launch aid loans and member-state financing and the development of new Airbus aircraft.

In total, the EU said the WTO failed to adhere to articles 1.1(b), 5(c) 6.3, 6.4, 6.5 and 7.8, SCM Agreement and articles 3.2, 11 and 21.5 of the Dispute Settlement Understanding.

Still Up in the Air

The appeal is the latest chapter in a long-running row between the EU and the U.S. regarding their respective aircraft manufacturing tax and subsidy regimes.

The case stems from the dissolution of a 1992 bilateral EU-U.S. agreement on trade in large civil aircraft that permitted each party to provide a certain level of support to their domestic aircraft industries.

After the U.S. withdrew from the agreement in 2004, it filed and won a WTO dispute in which it claimed France, Germany, Spain and the U.K. provided Airbus with subsidies that adversely affected U.S. interests in violation of WTO rules.

Next year, a separate WTO compliance panel is expected to deliver its decision as to whether the U.S. complied with the terms of a 2012 ruling against a series of illegal U.S. tax schemes that favored Boeing (105 ITD, 6/2/14).

Also pending is a separate EU dispute that claimed a U.S. aircraft subsidy scheme discriminated against imported goods because it required Boeing Co. to establish its 777X wing production and assembly in Washington state (97 ITD, 5/19/16).

To contact the reporter on this story: Bryce Baschuk in Geneva at correspondents@bna.com

To contact the editor responsible for this story: Jerome Ashton at jashton@bna.com

Copyright © 2016 The Bureau of National Affairs, Inc. All Rights Reserved.