RESTRICTED
WORLD TRADE TCA/M/4
25February 1997
ORGANIZATION(97-0774)
Committee onTrade inCivil Aircraft
MINUTES OFTHE MEETING OFTHE COMMITTEE
HELD ON8NOVEMBER 1996
Chairman: Mr.Hidetaka Saeki (Japan)
Page
A. Election oftheChairman oftheCommittee ofTrade inCivil Aircraft 1
B. Adoption ofAgenda 2
C. Consideration oftheStatus ofthe1979 Agreement onTrade inCivil Aircraft 2
under theWTO andoftheProposals Made toAddress theCurrent Issues
D. Matters under Article 8.3ofthe1979 Agreement onTrade inCivil Aircraft 4
E. Other Business -Election ofaViceChairman 5
F. Adoption oftheAnnual Report totheGeneral Council 6
A. Election oftheChairman oftheCommittee ofTrade inCivil Aircraft
1. TheSecretariat (Mr.JanWoznowski) saidthatMr.Abdel Fattah, before resigning from his
functions asChairman oftheCommittee onTrade inCivil Aircraft (hereafter "theCommittee") and
returning toEgypt, hadconducted intensive consultations withSignatories regarding theelection of
anewChairman. Potential candidates hadbeenmentioned onwhich agreement could bereached.
Inthatcontext, thefloor wasopened fordelegations tonominate aChairman.
2. Therepresentative ofCanada saidthatthere seemed tobeconsensus onthenomination of
Mr.Saeki ofJapan, andformally proposed hisnomination.
3. Therepresentative oftheUnited States supported thenomination andthanked Mr.Saeki for
hiswillingness tofillthisposition inadifficult timefortheCommittee. TheEuropean Communities
representative joined inthesupport ofthenomination ofMr.Saeki.
4. TheCommittee elected Mr.Saeki asitsChairman.
5. TheChairman saidthat,withthehelpofSignatories, hebelieved thatsignificant progress could
bemade onthematters facing theCommittee. Healsowelcomed Bulgaria asanewSignatory tothe
1979Agreement onTrade inCivil Aircraft (hereafter the"Aircraft Agreement"). Bulgaria deposited
itsinstrument ofacceptance on1November 1996. TheAgreement onTrade inCivil Aircraft entered
intoforce forBulgaria on1December 1996.TCA/M/4
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B. Adoption oftheAgenda
6. TheChairman noted thattheagenda forthemeeting wascontained inWTO/AIR/474 andsaid
thathewished toraiseoneitemunder "Other Business", regarding theelection ofaVice-Chairman.
TheCommittee adopted theagenda asamended.
C. Consideration oftheStatus ofthe1979Agreement onTrade inCivil Aircraft under theWTO
andoftheProposals Made toAddress theCurrent Issues
7. TheChairman recalled theefforts made bytheprevious Chairman toadapt theAircraft
AgreementtotheWTOstructure.HealsosharedthepreviousChairman'sconcernsregardingtheexisting
situation, primarily interms oflegalcertainty andheendorsed theproposal made atthemeeting of
theCommittee of7June1996. However, eventhough thatproposal hadbeensupported byanumber
ofSignatories, ithadnotbeenpossible toreach aconsensus onit.Hisunderstanding ofthesituation
wasthatthedraft protocol amending theAgreement andcontained inAnnex ItoAIR/W/98 of
26October 1994 didnotassuchraiseanyparticular problem forSignatories. However, ithadnot
beenpossible toreach anagreement onthedraftdecision tobeadopted together withtheprotocol
(AIR/W/98, Annex II).Asaresult, theprevious Chairman hadconsidered thattheproposal contained
inAIR/W/98 should, forthetimebeing, beleftaside andthatanother approach should befollowed.
Inthisconnection hehadmade anewproposal attheCommittee 'smeeting of7June1996.
8. TheChairman alsonoted that,inorder tosolve theproblem ofthetechnical adaptation ofthe
Aircraft Agreement totheWTO structure, twoproposals werecurrently before theCommittee. The
firstonehadbeenmade bytheChairman on7June1996 andwascomposed oftwodraftdecisions
(TCA/W/2 andTCA/W/3): oneclarified themeaning ofcertain provisions oftheAircraft Agreement
inthelightofthechanges brought about bytheentry intoforce oftheagreements annexed tothe
Agreement Establishing theWorld Trade Organization (hereafter the"WTO Agreements"); theother
draftdecision provided fortheapplication oftheintegrated dispute settlement mechanism oftheWTO
todisputes under theAircraft Agreement. Thesecond proposal before theCommittee wastheonemade
bytheUnited States atthemeeting of19July1996, consisting ofanamendment toArticle 8.8ofthe
Aircraft Agreement. Asthisproposal hadbeenmade under "Other Business", other delegations had
notbeeninaposition toexpress theirviews onit.Hetherefore asked theUnited States tobriefly
introduce theproposal onceagain.
9. Therepresentative oftheUnited States stated thattheobject oftheproposal wastoovercome
serious shortcomings perceived bytheUnited States intheproposal made bytheChairman on
7June1996. TheUSproposal wasatechnical, straightforward rectification thatrestored Article 8.8,
which would havebeenamended bythedraftprotocol contained inAIR/W/98, toitsoriginal structure.
Inaddition, itwould allow theAircraft Agreement tosubsequently beamended without changing the
balanceofrightsandobligationsundertheAgreementexceptfortheamendmentsthatwouldbeproposed.
Theproposal would alsoprovide forbinding dispute settlement, albeit outside theWTO Understanding
onRules andProcedures Governing theSettlement ofDisputes (hereafter the"DSU"), andpermit resort
totheAppellate Body. Itchanged nothing inthelegalrelationship thatexisted before theWTO or
since itsestablishment.
10. TheChairman stressed thattheChairman 'sproposal of7June1996 hadbeenpresented as
acompromise andthatanychange might disrupt itsbalance. Therefore, hedidnotintend toamend
orwithdraw itonhisowninitiative. ItwasuptoSignatories toact,andtopropose changes ifitwas
considered thatthistextdidnotmeettheirconcerns orwasnotproperly balanced. Hefurther insisted
ontheurgency offinding asolution. Healsorecalled thegeneral principle ofinternational lawthat
pacta suntservanda or,asprovided inArticle 26oftheVienna Convention ontheLawofTreatiesTCA/M/4
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(1969), thatevery treaty inforce isbinding upon theparties toitandmustbeperformed bythem in
good faith. TheChairman asked delegations toexpress theirviews.
11. Therepresentative ofJapan saidthatanyadaptation oftheAircraft Agreement tomake it
functional under theWTO should beeffected inamanner thatensured legalcertainty. Japan considered
theUSapproach tohavesome merit, because itsought amodification based ontheprovisions for
amending theAgreement contained inArticle 9.5.However, Japan could notaccept theUSproposal
asitwas,because itmight leadtothedenial oftheapplication ofdisciplines provided forintheAircraft
Agreement todisputes involving trade inaircraft, inparticular those related tosubsidies. Therefore,
Japan reserved itsposition ontheUSproposal. TheDSUshould beapplied todisputes intheaircraft
sector, andcurrent disciplines under theAircraft Agreement should notbeexcluded from applying
tothose disputes. Thetechnical adaptation toArticle 8.8hadtobemade inaccordance withthedraft
protocol amending theAgreement onTrade inCivil Aircraft asannexed toAIR/W/98.
12. Therepresentative oftheEuropean Communities saidthathisdelegation appreciated theefforts
made bytheformer Chairman toreach asolution tobring theAircraft Agreement intotheWTO and
opposed theideaofsuspending orterminating theAgreement. Heregretted thattheissues related
todispute settlement hadprevented theadoption ofthetechnical amendment. Noconvincing argument
hadbeenadvanced sofaragainst theapplicability oftheDSUtotheAircraft Agreement, which could
notbeexempted fromthefundamental principle ofaunified dispute settlement mechanism. Therefore,
theCommunities could notaccept exceptions orderogations totheapplication oftheDSU. Herecalled
thatoneofthestated objectives ofthetechnical revision wastoensure theproper operation ofthe
AircraftAgreementasaPlurilateralTradeAgreementincludedinAnnex4totheAgreementEstablishing
theWorld Trade Organization, andasacovered agreement included inAppendix 1totheDSU. The
proposal made bytheUSatthemeeting of19July1996didnotconstitute animprovement overprevious
positions because itexpressly provided forthenon-applicability oftheDSUtotheAircraft Agreement,
something hisdelegation could notaccept. TheCommunities could goalong withthecompromise
proposal putforward bytheformer Chairman andwerecommitted tofinding asatisfactory solution
along those lines.
13. Therepresentative ofCanada saidthathiscountry would bewilling toconsider theChairman 's
proposal aslongasitdidnotprevent alaterextension oftheproduct coverage oftheAircraft Agreement,
assuggested byCanada inOctober 1994 (AIR/W/97). Ifefforts tomake progress continued tobe
fruitless, Canada would reconsider itsmembership intheAircraft Agreement. Healsonoted thatthe
comments made byJapan andtheCommunities regarding theapplicability oftheDSUtotheAircraft
Agreement required careful consideration.
14. Therepresentative oftheUnited States noted thatSignatories seemed toprefer anamendment
totheAircraft Agreement under Article 9.5thatwould make theAircraft Agreement susceptible of
future amendments without upsetting thebalance ofrights andobligations among theWTO Agreements.
Withrespect totheapplication oftheDSUtotheAircraft Agreement, herecalled thathisdelegation 's
original position wasthattheDSU should apply. However, problems hadarisen because Signatories
wereunable totakethedecision torectify theAircraft Agreement bythetimeofthesignature ofthe
Agreement Establishing theWorld Trade Organization. Therefore, anysubsequent decision would
make therectified agreement alater-in-time agreement andwould upset thebalance ofrights and
obligations between theAgreement onSubsidies andCountervailing Measures (hereafter "theSCM
Agreement") andtheAircraft Agreement. TheUnited States hadworked toremedy thesituation by
making proposals calling either forrestoration ofArticle 8.8toitsoriginal structure orforachange
inAIR/W/98 thatwould specifically setouttheprecedential relationship between theSCM Agreement
andtheAircraft Agreement. Asecond-best solution would bearesolution ordecision thatwould
accompany theproposed changes contained inAIR/W/98 andwould preserve theexisting precedential
relationship. Without suchactions uncertainty would remain, (i)astotheinterpretation bytheDSUTCA/M/4
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ofthisrelationship, (ii)regarding certain ambiguous wording inArticle 6.1oftheAircraft Agreement,
and(iii)astohowtheAgreement would apply intheevent ofadispute under theSCM Agreement.
Thiswasnotatheoretical matter because thissituation hadbeendiscussed inthecaseraised bythe
United States under the1979 Agreement onInterpretation andApplication ofArticles VI,XVIand
XXIII ofGATT 1947 against certain German measures intheform ofexchange rateguarantees for
Airbus suppliers, which thecomplainants andthepanel hadconsidered tobeprohibited subsidies1.
Inthatcaseithadbeenargued thatthematter should beaddressed bytheAircraft Committee andthat
certain ambiguous wording intheAircraft Agreement should betaken intoaccount inadjudicating
thecase. TheUnited States wasready toaccept technical rectification totheAircraft Agreement, but
atleastoneparty wanted tochange thebalance ofrights andobligations under theSCM Agreement
through substantive rectification totheAircraft Agreement. Hesaidthattheauthorities ofoneSignatory
hadrecently expressed theview thattheUruguay Round negotiations hadproduced a"balanced
compromise" withrespect totheSCM Agreement. Hisdelegation didnotwanttoseethisbalance
upset bychanging thefactors thatcould belooked atbypanels. TheUnited States would notblock
therectification oftheAircraft Agreement aslongasitmaintained thatbalance, butiftherewereefforts
tochange thestatus quoante,itwould oppose them.
15. Therepresentative oftheEuropean Communities saidthatseveral attempts hadbeenmade
toadapt theAircraft Agreement overtheyears. In1994, oneSignatory which hadaccepted theprotocol
andrelated decision contained inAIR/W/98 adreferendum hadwithdrawn itsacceptance without any
justification sofar.TheAircraft Agreement needed tobeformally brought under theWTO structure,
without excluding theapplication oftheDSUtoit.Inhisview, other delegations shared thisopinion.
16. TheChairman concluded thatneither ofthetwoproposals currently onthetablewasacceptable
andthatnoalternative textwascurrently available. Hesaidthatthepresent deadlock raised systemic
issues fortheWTO which called forurgent action. Thelegal uncertainty inwhich theAircraft
Agreement wasleftmight create aconfusing precedent fortheapplication ofother WTO Agreements.
Anydelay would reinforce theeffect ofprecedent ofthissituation. TheChairman urged Signatories
towork withhimonfinding asolution. Heintended topursue theefforts ofhispredecessor andto
engage ininformal consultations, withallinterested Signatories, toexplore waystosolve thisproblem.
17. TheCommittee tooknoteofthestatements.
D. Matters under Article 8.3ofthe1979 Agreement onTrade inCivil Aircraft
18. TheChairman recalled thatattheCommittee 'smeeting of19July1996, theUnited States
hadraised amatter under "Other Business" relating tonegotiations under Article 8.3oftheAircraft
Agreement.
19. Therepresentative oftheUnited States saidthattheSub-Committee entrusted withthetask
ofconducting negotiations under Article 8.3oftheAgreement hadnotmetforsome timeandthat
nonewproposal hadbeenputforward. Itseemed tohisdelegation thatthose negotiations should be
brought toasettlement. Thiscould bedoneinoneofthreeways: first,theCommittee could terminate
thenegotiations, anoption which wasnotfavoured byhisdelegation. Second, Signatories could harvest
theresults inthose areas where there wasconsensus suchasinducements ortransparency. Third, a
newmandate could bedefined thatwould bemore achievable, sincethereseemed tobelargedifferences
ofviewonproducts other thanlarge civilaircraft, andsince theUnited States andtheCommunities
hadmade some proposals onlarge civilaircraft based ontheir1992 bilateral agreement.
1German Exchange Rate Scheme ForDeutsche Airbus, Report bythePanel, SCM/142, 4March 1992,
unadopted.TCA/M/4
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20. Therepresentative oftheEuropean Communities saidthattheEChadbeenparticipating in
good faithinthese negotiations andwasdisappointed thatnoprogress hadbeenmade todate. The
views expressed intheCommittee meeting ofDecember 1993onthecontinuation ofnegotiations were
stillvalid, andhisdelegation expected thattheCommittee would resume itswork inthisrespect in
1997. Regarding thethree options putforward bytheUnited States hesaidthatfirst,theCommunity
opposed thetermination ofnegotiations forthereasons juststated. Second, accepting limited
modifications totheAircraft Agreement would betantamount toadmitting thatthenegotiations on
themore important issues suchassubsidies hadeither failed orwere terminated, something the
Communities could notaccept. IntheCommunities 'viewthepresent negotiations should continue
pursuant totheviews expressed intheCommittee inDecember 1993.
21. Therepresentative ofJapan saidthathisauthorities needed moretimetostudy theUSproposal.
However,asArticle8.3simplyprovidedthatSignatoriesshallundertakefurthernegotiationsperiodically,
itseemed unclear whether negotiations needed tobeterminated atacertain fixedpointintimeorwhether
arenewed mandate wasnecessary before theCommittee could startnewdiscussions. Heasked for
further clarification onthispoint fromtheUnited States. Considering thesituation oftheAgreement,
theCommittee should givepriority tothenegotiations ontechnical adaptation totheWTO system before
taking anydecision tocontinue orterminate thesubstantive negotiations under Article 8.3.
22. TherepresentativeofCanadaexpressedthehopethatdiscussionscouldcontinueonthesuggestion
toexpand theproduct coverage oftheAgreement. Thiswould represent astepforward inthedisciplines
imposed bytheAgreement. Inthisregard, heconsidered thattheinclusion of,forinstance, ground
maintenance simulators intheAircraft Agreement 'sAnnex onproduct coverage would beacritical
element intheupdating oftheAgreement.
23. Therepresentative oftheUnited States saidthatArticle 8.3provided forperiodic revisions.
There hadbeenadecision bytheCommittee tosetupaSub-Committee, andthatdecision would remain
applicable unless theCommittee decided toabrogate it.Tocarry outthenegotiations under Article 8.3
andformally amend theAgreement under Article 9.5would runincounterpurposes totheChairman 's
proposal which intended topreserve thestatus quoantebynever amending theAircraft Agreement
andleaving itasanearlier-in-time agreement. TheUnited States wasconcerned thatthere seemed
tobeaconflict between those proposals. Regarding theECstatement thatitwould notbeready to
accept apartial amendment totheAgreement, hesaidthattheproposed amendments intheareaof
inducements, transparency andother government interventions, would beself-balancing. Hedidnot
seeaconflict between thatearly harvest ofcertain provisions where consensus hadbeenreached and
continuing negotiations inother areas. Thiscould constitute afourth option.
24. Therepresentative oftheEuropean Communities saidthattheECposition remained that
negotiations should continue tofocus onreaching agreement onafullpackage andnottosettle for
secondary issues first.
25. TheCommittee tooknoteofthestatements.
E. Other Business -Election ofaVice-Chairman
26. TheChairmannotedthatthepostofVice-ChairmanhadbeenformallyvacantsinceMr.Latrille's
resignation inJune1996. Heintended toinitiate consultations withSignatories soonsothatanewVice-
Chairman could beelected.
27. TheCommittee tooknoteofthestatement.TCA/M/4
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F. Adoption oftheAnnual Report totheGeneral Council
28. TheChairman recalled thatpursuant toArticle 8.2oftheAgreement onTrade inCivilAircraft,
theCommittee hastoreview annually theimplementation andoperation oftheAgreement andtoinform
theCONTRACTING PARTIES ofdevelopments during theperiod covered bysuchreview. Hesaid
thatwhile GATT 1947 hadbeenterminated, Article IV.8oftheWTO Agreement specified thatthe
bodies provided forunder thePlurilateral Trade Agreements hadtokeeptheWTO General Council
informed oftheiractivities onaregular basis. TheChairman saidthatthedraftreport (TCA/W/1)
oftheCommittee activities hadbeencirculated toSignatories forthem toreview.
29. TherepresentativeoftheEuropeanCommunitiessuggestedthatsomelanguageshouldbeincluded
inparagraph 8ofthedraftreport totakeintoaccount theongoing work withrespect tothenegotiations
tomake theAircraft Agreement operational under theWTO andthose carried outunder Article 8.3.
30. Therepresentative oftheUnited States saidthatanylanguage inparagraph 8should referonly
toatechnical rectification andtoupdating thereferences totheWTO.
31. Therepresentative ofCanada saidthathisdelegation would prefer some more general language
totakeintoaccount thefullsubstance ofthenegotiations taking place. Heproposed compromise
language inparagraph 8tocover theissue.
32. Onthebasis ofthesuggestions made, thispartofthetextwasagreed upon.
33. Therepresentative oftheUnited States suggested alternative language forparagraph 6inorder
tomake itcompatible withtheconcluding remarks inparagraph 8,andinorder nottorepeat the
concluding observations inbothparagraphs.
34. Therepresentative oftheEuropean Communities saidthatthenewlanguage should takeinto
accountthatdivergentviewswereexpressedonthesubstantiveissueofthenegotiationsunderArticle8.3
oftheAgreement.
35. TheChairman proposed compromise language tocover theissue, andonthebasis ofthe
suggestions made, thispartofthetextwasagreed.
36. TheCommittee adopted thereport asamended2.
2Thereport wassubsequently circulated indocument WT/L/193.