in Aerospace

WTO reports on EU compliance in commercial aircraft dispute

Posted 15 May 2018 · Add Comment

Today the WTO’s Appellate Body issued its report in the case “European Communities and Certain Member States — Measures Affecting Trade in Large Civil Aircraft — Recourse to Article 21.5 of the DSU” (DS316), which is the first of two rulings on subsidies in the large commercial aircraft dispute between the EU and the USA due this year.

Based on its review of the appropriate Panel's analysis, the Appellate Body ultimately upheld the Panel's conclusion that insofar as significant lost sales in the twin-aisle markets (in which Airbus and Boeing sell the A330, A350XWB, 767, 777 and 787 product families) and significant lost sales and impedance in the very large aircraft markets (the A380 and 747) are concerned, the European Union had failed to comply with the recommendations and rulings of the DSB in the original dispute because the underlying subsidies continued to exist and cause adverse effects.

However, the Appellate Body did not uphold the Panel's findings of displacement in these two markets or its finding of impedance in the twin-aisle market. With regard to the market for single-aisle aircraft (in which the A320 and Boeing 737 compete), the Appellate Body observed that the Panel's findings concerned primarily the effects of subsidies that had expired before 1 December 2011 (the time by which the European Union had been required to comply with the recommendations and rulings of the DSB in the original dispute). The Appellate Body was not convinced that the Panel's analysis in this regard provided a sufficient basis to find that subsidies provided to Airbus continued to cause adverse effects in the market for single-aisle aircraft.

Boeing and Airbus both issued responses to the WTO's decision.

Dennis Muilenburg, Boeing chairman, president and CEO, said: "Today's final ruling sends a clear message: disregard for the rules and illegal subsidies is not tolerated. The commercial success of products and services should be driven by their merits and not by market-distorting actions.
 
"Now that the WTO has issued its final ruling, it is incumbent upon all parties to fully comply as such actions will ultimately produce the best outcomes for our customers and the mutual health of our industry. We appreciate the tireless efforts of the US Trade Representative over the 14 years of this investigation to strengthen the global aerospace industry by ending illegal subsidies."

Airbus CEO Tom Enders said: “Today’s significant legal success for the European aviation industry confirms our strategy which we have followed over all those years of the dispute. Of course, today’s report is really only half the story – the other half coming out later this year will rule strongly on Boeing’s subsidies and we’ll see then where the balance lies.

“It is clear that their position today is straightforward healthy: they have half the market and a full order book, they have clearly not been damaged by Airbus repayable loans.”

Airbus thanked the European Commission and the governments of France, Germany, the United Kingdom and Spain for their continuous support throughout the dispute process. “Airbus is grateful for the time and effort that has been invested in defending the interests of the aviation industry,” Airbus CEO Tom Enders stated.

Airbus called for all parties to accept the global nature of trade and to put an end to the long-running, disruptive dispute, stating that 'An amicable negotiation with no preconditions is the only viable solution, either between the EU and the US or ideally a global agreement'.

Tom Enders said: “The current geopolitical climate for trade is worrying and industry players should not fuel it with unproductive disputes that undermine fair competition worldwide and impact the workers in this industry as well as our customers and operators. The consequences of such disputes extend beyond the aerospace industry and affect economic growth on a global scale.”

The WTO still has to reach a decision relating to a Washington state tax measure which is under appeal, set to be reached later this year. Boeing said in a statement that it 'believes that ruling will be reversed, but if not, Boeing has pledged to do whatever necessary to come into full compliance in the interest of upholding rules-based trade, which is essential to fairness and the future prosperity of the global aerospace industry'.

 

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