RESTRICTED  WORLD TRADE  
ORGANIZATION  WT/DSB/M/191 
28 June 2005 
 (05-2772) 
Dispute Settlement Body 
13 June 2005  
 
 
 
MINUTES OF MEETING 
 
Held in the Centre William Rappard  
on 13 June 2005  
 
Chairman:  Mr. Eirik Glenne (Norway) 
 
 Subjects discussed
: Page  
 
1. European Communities and certain member States – Measures affecting trade 
in large civil aircraft ........................................................................................................ .........1  
(a) Request for the establishment of a panel by the United States ...................................................1  
2. United States – Measures affecting trade in large civil aircraft ...........................................3  
(a) Request for the establishment of a pa nel by the European Communities...................................3  
3. Implementation of the reco mmendations of the DSB............................................................5  
(a) European Communities – Expor t subsidies on sugar..................................................................5  
(b) Dominican Republic – Measures affecting the importation and internal sale of 
cigarettes ..................................................................................................................... ................7  
 
1. European Communities and certain member States – Measures affecting trade in large 
civil aircraft 
(a) Request for the establishment of a panel by the United States (WT/DS316/2)  
1. The Chairman  drew attention to the communication from the United States contained in 
document WT/DS316/2, and  invited the representative of the United States to speak. 
2. The representative of the United States  said that, as described in the US panel request of 
31 May 2005, the United States was concerned that certain measures of France, Germany, the 
United Kingdom, Spain, and the EC provided subsidies that were inconsistent with their obligations 
under the SCM Agreement and the GATT 1994.  The subsidies at issue benefitted Airbus, the 
European manufacturer of large civil aircraft.  The United States had long been concerned about the subsidization of Airbus.  Over its 35-year histor y, Airbus had benefitted from massive amounts of EC 
member State and EC subsidies that had enabled th e company to create a full product line of aircraft 
and gain more than a 50 per cent share of large civil aircraft sales.  Every major Airbus aircraft model 
was financed, in whole or in part, with government subsidies taking the form of "launch aid" – that was, financing with no or low rates of interest, and repayment tied to, and entirely dependent on, sales 
of the financed aircraft.  Moreover, if a particul ar model did not sell well, Airbus did not have to 
repay the financing.  The Airbus A380 "super jum bo" alone received approxi mately US$3.7 billion in 
launch aid subsidies from France, Germany, Spain, and the United Kingdom. WT/DSB/M/191 
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 3. Airbus had also received numerous other typ es of subsidies.  For example, Airbus had 
received over US$1 billion in subsidized financing from the European Investment Bank for use in 
developing several of its aircraft models.  Like wise, EC member State governments had spent over €1 
billion in recent years to create in frastructure for the specific use of Airbus.  For example, in 
2000-2003, the City of Hamburg had spent €751 milli on to fill in a protected wetland on the River 
Elbe to create additional land for Airbus's use at its production site in Hamburg.  EC member State 
governments had also assumed and forgiven billions of  euros worth of debt owed by Airbus, and had 
made numerous equity infusions and grants into the Airbus companies that private investors would 
not have made.  In addition, the EC and its member  States had provided billions of euros to Airbus for 
civil aeronautics research and development.  The EC's Sixth Framework Program alone had allocated 
over €1 billion to such projects.  Most of the fundi ng at issue took the form of outright grants that 
Airbus had used to underwrite its commercial re search.  And unlike civil aeronautics R&D in the 
United States, EC-funded civil aeronautics R&D focused  on producing results that  Airbus could apply 
to products in the near- and medium-term.  Airbus ha d used these subsidies to seize more than half of 
the large civil aircraft market at the expense of its US competitors.  And yet it continued to seek and 
receive new subsidies.  It was time for the subsidies to end. 
4. The United States considered that the EC a nd member State subsidies to Airbus were 
inconsistent with Articles 3.1(a), 3.2, 5(a), 5(c), 6. 3(a), 6.3(b), and 6.3(c) of the SCM Agreement, and 
Article XVI:1 of the GATT 1994.  She recalled th at on 4 November 2004, the United States and the 
EC and the member States had held consultations.  Unfortunately, those consultations had failed to 
resolve the US concerns.  Accordingly, the Unite d States was requesting that the DSB establish a 
panel to examine these matters, in accordance with  Articles 4.4 and 7.4 of the SCM Agreement and 
Article 7 of the DSU.  Further, should a panel be  established at the present meeting, as described in 
the US panel request of 31 May 2005, the United St ates would also request that the DSB initiate the 
procedures provided for in Annex V of the SCM Agreem ent, pursuant to paragraph 2 of that Annex.  
At a future meeting, the United States would also be asking the DSB to designate a representative to 
serve the function of facilitating the information-ga thering process, pursuant to paragraph 4 of that 
Annex.  The United States was exploring with the EC options for naming that representative. 
5. The representative of the European Communities
 said that the EC was deeply disappointed 
about the decision of the United States to choose th e path of litigation and confrontation.  The US 
decision to request a panel would spark what was lik ely the biggest, most complicated and costly legal 
dispute in WTO history.  At a time that all WTO Members should be concentrating on the Doha 
negotiations, the US decision resulted in serious di version of energy and resources both in the WTO 
Members concerned as well as in the WTO on issues th at should and could have been dealt through 
negotiations.  The EC and the United States had a bilateral Agreement dating back to 1992 on Trade 
in Large Civil Aircraft which regulated explicitl y the forms and level of government support the 
United States and the EC could provide to Boeing and Airbus respectively.  It was within that forum 
that a negotiated solution should be reached. 
6. While it was the choice of the United States to  pursue its rights under the WTO Agreements, 
the United States did not have a right to use th e dispute settlement system for purely speculative 
claims.  Indeed, in the recent "Upland Cotton" dispute, the United States itself had protested and had prevailed against the inclusion of a measure that ha d not even existed when the panel request had been 
made and considered by the DSB.  That was prec isely what the United States itself had been doing 
with respect of alleged measures relating to the ne w Airbus plane A350.  As all were aware neither 
the DSU nor the SCM Agreement allowed WTO Memb ers to use it against a perceived threat of 
subsidization.  A measure subject to WTO dispute settlement must be subject to consultations and 
exist at the time of the panel request.  No such  alleged support existed for the A350, neither in 
October 2004 when the US had asked for consultations  nor now, nor in the very near future.  Indeed 
this aircraft had not yet even been launched and no  decision had been taken on whether or not the EC 
member States wished to i nvest in this project.  The fact that the United States was attacking a non- WT/DSB/M/191 
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 existent measure was not only ludicrous.  It spoke volumes about the real intentions of the United 
States – that was to intervene in a commercial battle  between two companies and to seek to influence 
the market in favour of Boeing.  The EC, therefore, strongly objected to the inclusion of this non-existing measure into the panel request.  The EC would not accept that the United States misuse the 
WTO dispute settlement for speculative purposes. 
7. Unfortunately, this was not the only flaw of the US panel request.  Even a cursory reading of 
the panel request filed by the United States had reveal ed that a number of allegations regarding certain 
purported measures did not figure in the US consultati ons request and they had not been the subject of 
proper WTO consultations.  Thus, a nd according to established WTO jurisprudence, they could not be 
the subject of a panel request.  Moreover, the pa nel request was strikingly unspecific, and the EC 
would raise with the United States a number of questions to be able to understand it.  For example, the 
United States had included claims against a broa d range of research a nd development programs, 
which had been formulated so broadly that they could be understood to co ver suppliers to Airbus, 
thereby extending the scope of the dispute.  The EC noted that such  a development, being in sharp 
contrast with the consultations, threat ened to escalate the dispute further. 
8. The EC did not intend to enumerate all the m easures which had been included in the US panel 
request and which the EC believed we re outside of the future panel' s terms of reference.  The EC 
reserved the right to do so before the panel.  The EC did not intend to proceed any further at this time.  
The EC had made clear that it entertained a number  of serious objections to the US panel request 
based on jurisdictional grounds.  In particular, the i ssue related to the allege d financing to A350 was 
the most serious one.  The EC reserved its right to  raise these and other objections later before the 
panel.  He underlined that the EC was determined to fully defend its legitimate interests and ensure 
that conditions of fair competition prevailed in the production of civil aircraft.  Finally, he said that 
the EC objected to the establishment of a panel at the present meeting. 
9. The DSB took note
 of the statements and agreed  to revert to this matter. 
2. United States – Measures affecting trade in large civil aircraft 
(a) Request for the establishment of a panel by the European Communities (WT/DS317/2) 
10. The Chairman  drew attention to the communica tion from the European Communities 
contained in document WT/DS317/2, and invited the representative of the European Communities to 
speak. 
11. The representative of th e European Communities  said that the EC's request was rendered 
necessary by the US action th at had just been discussed and the fact  that it was in reality US subsidies 
to Boeing that were distorting the market for la rge civil aircraft.  The EC and United States had a 
bilateral Agreement since 1992 on Trade in Large Ci vil Aircraft, which regulated explicitly the forms 
and level of government support the United States a nd the EC could provide to Boeing and Airbus 
respectively, and the EC would have preferred to r esolve this matter in that forum.  Unfortunately, 
however, the United States had refused to allow this  to happen. As had just been noted, the US 
decision would spark probably the biggest, most di fficult and costly legal dispute in the WTO's 
history.  At a time that all WTO Members should be concentrating on the Doha negotiations, the US decision had resulted in serious diversion of energy and resources both in the WTO Members concerned as well as in the WTO on issues th at should and could have  been dealt through 
negotiations. 
12. This was the reason why the EC  had engaged in good faith negotiations to revise the 1992 
Agreement on the basis of an understanding of 11  January 2005. The EC's objective from the very 
beginning was to secure a rapid, fair, equitable a nd balanced agreement regarding subsidies for Large WT/DSB/M/191 
Page 4  
 
 Civil Aircraft.  The EC had tried hard to secure th is objective.  Regrettably, this had not been  
achieved.  This was neither the time nor the plac e for analyzing the real causes for this failure.  
Simply, the EC needed to stress that the United States, through its intransigent attitude, had blocked 
any meaningful negotiation.  In order to sustain conditions for fair competition in civil aircraft 
production and to defend its interest s, the EC had no alternative than to respond and resume action in 
the WTO. 
13. Indeed, as was apparent from the EC's panel re quest, the EC had significantly more measures 
to attack exceeding by far the value of any measur es attacked by the United St ates.  The evidence that 
the EC had collected over the years clearly demonstrated that Boeing had been benefiting – and continued to benefit – from massive subsidies in vi olation of the SCM Agreem ent.  These subsidies 
also violated a long-standing treaty between the United States and the EC which governed the terms 
under which support to development of large civil airc raft could be provided.  There was no need to 
enumerate in detail all the various and WTO-incomp atible forms of subsidies granted to Boeing.  
However, one should take a look at the facts conc erning Boeing's colossal use of public funds and 
taxpayer subsidies in its operations:  (i) Boeing's di fferent forms of subsidies from the US federal and 
state governments benefitted the development, produc tion and sales of its civil aircraft.  Taken 
together, US subsidies had consistently exceeded the 1992 EC-US Agreement by two to three times.  
None of these subsidies had been reimbursed;  ( ii) In the United States, Boeing received subsidies 
from NASA, the Department of Defence and the De partment of Commerce contracts estimated at 
US$22 billion over the past decade.  This had financed specific Boeing technology research the 
results of which had been integrated into specific Boeing models and in particular to Boeing 787,  
which was under production.  It was important to str ess that this particular aircraft, the 787, would 
receive US taxpayer subsidies amounting to 70 per ce nt of its total development cost.  Boeing would 
contribute only 15 per cent;  (iii) It was widely  acknowledged in US Congr essional circles that non-
competitive "military" contracts at inflated prices bene fited Boeing's civil aircraft business.  In other 
words,  R&D for Boeing's civil ai rplanes was being paid for from US military budgets, rather that 
Boeing's own pocket;  (iv) Under such circumstance s, it did not come as a surprise that Boeing had 
also been allowed to use researc h, test and evaluation facilities owned by the US government to its 
benefit;  (v) In addition, Boeing continued to bene fit substantially from US Foreign Sales Corporation 
tax breaks, infringing WTO law.  Members were awar e of the current panel proceedings that the EC 
had initiated as a result of the US refusal to te rminate as it should have done, the WTO-illegal 
subsidies granted under the FSC/ETI and releva nt successor legislation and of which Boeing 
continued to be the major beneficiar y;  and (vi) At the sub-federal le vel, the State of Washington in an 
unprecedented move, had committed US$3.2 billion in tax breaks and US$4.2 billion in infrastructure 
payments to Boeing for production of the 787 over the next years.  Other stat es and cities, such as 
Kansas and Illinois had done likewise. All these subs idies that the United States granted to Boeing 
distorted trade to the detriment of Airbus and breached US obligations under the WTO.  It was, 
therefore, essential to put an end to them and to re -establish a level playing situation.  He underlined 
that the EC shall fully defend its legitimate inter ests as well as the integral application of the SCM 
disciplines. 
14. The representative of the United States
 said that her country was disappointed that the EC had 
requested a panel on this matter.  The EC's request was broad, but without merit.  The United States 
intended to defend the measures at issue vigorously.  In that regard, the United States noted that not 
all of the items identified by the EC in its panel request were "measures," including, for example, the 
High Speed Research Program Technology Transfer Control Handbook.  The United States also noted 
that many of the alleged programs and measures c ontained in the EC's panel request had not been 
consulted upon and had not been included in the EC 's request for consultations.  Therefore, the DSU 
did not permit the EC to pursue panel proceedings with regard to those programs and measures at this 
time.  For example, 13 of the 28 alleged subsidy pr ograms referenced in the panel request were not 
listed in the consultation request.  In addition, more  than half of the underlying laws and regulations 
cited in the panel request were not provided for in  the request for consultations.  Separately, the  WT/DSB/M/191 
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 United States was surprised to see that the EC had included the procurement of military aircraft and 
military research and development f unding as alleged subsidies to large civil aircraft.  The fact was, 
Airbus and its corporate parents, EADS and BAE Systems, also participated in the US defense 
market.  BAE Systems alone was one of the top ten participants in the very programs the EC was attacking as subsidies to US large civil aircraft producers.  Airbus and its corporate parents also 
participated in many military procurements in Eu rope, such as the A400 and the Eurofighter.  The 
United States had been carefully studying these program s.  It noted that the EC had provided billions 
of euros in military R&D funding to Airbus and to its corporate parents, EADS and BAE Systems.  
The United States had assumed that, like its m ilitary procurements, these programs were tied to 
military purposes.  However, given the EC's apparent belief that military R&D was related to civil 
aircraft technology, the United States might need to reevaluate its assumptions about the A400 and 
Eurofighter programs.  In light of these consider ations, the United States was not in a position to 
accept the establishment of a panel at the present meeting. 
15. The representative of th e European Communities
  said that the US objections were unjustified 
and unfounded.  Even a cursory reading of the EC's request for consultations and its panel request was 
sufficient to demonstrate that the US objections we re without merit.  The wording employed in the 
consultation request was wide enough to cover all th e measures listed in the panel request.  Further, 
the EC wished to point out that following the cons ultations held in Geneva  on 5 November 2004, it 
had requested further consultations on the basis of additional questions that had been addressed to the 
United States.  The United States had explicitly dec lined to continue consu ltations and thus bore the 
responsibility for that.  The EC would take careful note of these objections and verify again.  What 
could already be stated at this stage was that th e United States seemed to apply different rules with 
regard to its own requests.  It attacked the EC  for not having specified, for example, sub-state 
authorities in the panel request that had not been identified in the consultations. 
16. The DSB took note  of the statements and agreed  to revert to this matter. 
3. Implementation of the recommendations of the DSB 
(a) European Communities – Export subsidies on sugar 
 (b) Dominican Republic – Measures affecting the importation and internal sale of cigarettes  17. The Chairman
 recalled that in accordance with the DSU provisions, the DSB was required to 
keep under surveillance the implementation of reco mmendations and rulings of the DSB in order to 
ensure effective resolution of disputes to the benefit of all Members.  In this respect, Article 21.3 of 
the DSU provided that the Member concerned shall in form the DSB, within 30 days after the date of 
adoption of the panel or Appellate Body report, of its intentions in respect of implementation of the 
recommendations and rulings of the DSB.  He propo sed that the two sub-items to which he had just 
referred be considered separately. 
(a) European Communities – Export subsidies on sugar 
18. The Chairman  recalled that at its meeting on 19 May 2005, the DSB had adopted the 
Appellate Body Report pertaining to the complaints by Australia, Brazil and Thailand in the case on:  
"European Communities – Export Subsidies on Sugar" a nd the Panel Reports with regard to the same 
matters, as modified by the Appellate Body Report.  He then invited the EC to inform the DSB of its 
intentions in respect of implementation of the recommendations. 
19. The representative of the European Communities  recalled that on 19 May 2005, the DSB had 
adopted the recommendations and rulings in the "EC – Sugar" dispute brought by Australia, Brazil and Thailand by adopting the Appellate Body an d the Panel Reports.  The EC intended to fully WT/DSB/M/191 
Page 6  
 
 implement the DSB's recommendations and rulings in  this case in a manner consistent with the WTO 
obligations.  The EC had begun already to evaluate  options for doing so.  In order to achieve 
compliance with the DSB's rulings and recomme ndations, the EC was required to modify its 
legislation regarding the sugar sector; i.e. its  common market organization as well as to adopt 
subsidiary legislation on that basis.  Due to th e complexity of the issues involved and the need to 
adopt a Council regulation as well as subsidiary legisl ation, the EC would need a reasonable period of 
time in which to comply with the DSB's recommenda tions and rulings.  The EC stood ready to discuss 
with Australia, Brazil and Thailand on an appropria te duration of this reas onable period of time for 
implementation, in accordance with Article 21.3(b) of the DSU. 
20. The representative of Australia
 said that her country welcomed the EC's advice that it 
intended to implement the DSB's recommendations and rulings in this dispute.  Australia looked 
forward to the scheduling of early consultations with  the EC with a view to reaching agreement on the  
reasonable period of time for implementation by th e EC, in accordance with the provisions of 
Article 21.3 of the DSU.  With regard to the EC 's claim that it was required to make legislative 
changes in order to implement the DSB's recommendati ons and rulings in this dispute, in Australia's 
view, there was no legal barrier to implementation by the EC under the existing system, and there was 
no reason why the EC could not commen ce its implementation straight away. 
21. The representative of Brazil  said that his country welcomed the statement by the EC 
concerning its intentions with regard to the implementation of the DSB's recommendation in the 
"Sugar" dispute, in line with what the EC had indicated at the 19 May 2005 DSB meeting.  Brazil believed that the EC would share its view that, in lig ht of both dispute-specific and systemic interests, 
Members should make their best efforts not to tr ansform their obligations under Article 21.3 of the 
DSU in a pro forma  exercise depleted of any substance.  Br azil stood ready to consult with the EC at 
the earliest opportunity on a reasonable period of time for implementation. 
22. With reference to the need expressed by the EC  to promote changes in its legislation, the 
representative of Brazil wished to echo Australia’s view that there was no legal barrier to 
implementation by the EC under its existing syst em, as Brazil had stated at the 19 May 2005 DSB 
meeting, and that there was no reason why the EC could not commence implementation straight away. 
23. The representative of Thailand
 said that, like others, his country also welcomed the statement 
made by the EC informing the DSB of its inten tion to implement the recommendations and rulings 
made by the Panel and the Appellate  Body in relation to this dispute.  Thailand looked forward to 
consultations with the EC  on the reasonable period of time for implementation by the EC.  Thailand 
envisaged that such consultations would be initiate d as soon as possible.  Thailand was ready to work 
together with the EC in order to achieve this goal and ensure that th ese consultations were as efficient 
as possible. 
24. The representative of Mauritius  said that her delegation wished to reiterate the request made at 
the 19 May 2005 DSB meeting whereby on behalf of  the 14 ACP countries – which had participated 
in the proceedings of the Panel and the Appe llate Body – it had called upon the EC and the 
complainants to accept that the ACP countries be involved in the negotiatio ns on implementation.  
Her delegation had taken good note of the statement ma de by the EC regarding its proposal to modify 
its legislation in the sugar sector as well as to adopt subs idiary legislation on that basis.  In this regard, 
Mauritius wished to underscore that  the ACP countries expected that in modifying its legislation in 
the sugar sector, the EC would fully comply with  its legal, moral and political commitments vis-à-vis  
the ACP sugar supplying countries, and in partic ular, its commitments under the ACP/EC Sugar 
Protocol and Article 36(4) of the Cotonou Agreemen t.  She noted that Article 36(4) called for the 
safeguarding of the benefits to the ACP countries wh ile taking into account the special legal status of 
the Protocol.  WT/DSB/M/191 
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 25. The DSB took note  of the statements, and of the information provided by the European 
Communities regarding its intentions in respect of implementation of the DSB's recommendations. 
(b) Dominican Republic – Measures affecting the importation and internal sale of cigarettes 
26. The Chairman  recalled that at its meeting on 19 May 2005, the DSB had adopted the 
Appellate Body Report in the case on:  "Dominican Republic – Measures Affecting the Importation 
and Internal Sale of Cigarettes" and the Panel Report on the same matter, as modified by the 
Appellate Body Report.  He then invited the Domini can Republic to inform the DSB of its intentions 
in respect of implementation of the recommendations. 
27. The representative of the Dominican Republic  recalled that at its meeting on 19 May 2005, 
the DSB had adopted the recommendations pertaining to the dispute "Dominican Republic – 
Measures Affecting the Importation and Internal Sales of Cigarettes".  At the present meeting, she 
wished to inform the DSB of her country's inte ntion regarding the implementation of the DSB's 
recommendations, pursuant to Article 21.3 of the DSU.   She said that her government firmly intended 
to implement the DSB's recommendations pertaining  to this case.  Accordingly, the Dominican 
Republic was evaluating various options for impl ementation of these recommendations, but it would 
require a reasonable period of time for that purpose.   Her  country was currently holding discussions 
with Honduras in an effort to reach an agreem ent on a reasonable period of time, pursuant to 
Article 21.3(b) of the DSU.  
28. The representative of Honduras  thanked the delegation of the Dominican Republic for the 
statement that the Dominican Republic firmly intended to comply with the findings and recommendations of the Panel and the Appellate Body in this matter.  Honduras wished to remind the 
Dominican Republic that prompt compliance with the DSB's rulings and recommendations was 
essential.  Accordingly, Honduras considered that the rulings and recommendations relating to this 
dispute could be implemented immediately. 
29. The DSB took note
 of the statements, and of the information provided by the Dominican 
Republic regarding its intentions in respect of implementation of the DSB's recommendations. 
__________