RESTRICTED  
  
WT/DSB/M/435  
12 December  2019 
(19-8036) Page: 1/3 
Dispute Settlement Body  
14 October 2019   
 
  
MINUTES OF MEETING  
HELD IN THE CENTRE WILLIAM RAPPARD  
ON 14 OCTOBER  2019 
Chairman : H.E.  Dr David Walker (New Zealand)  
1  EUROPEAN COMMUNITIES  AND CERTAIN MEMBER STATES – MEASURES AF FECTING 
TRADE IN LARGE CIVIL  AIRCRAFT  
A. Recourse by the United States to Article 7.9 of the SCM Agreement and Article 22.7 of 
the DSU (WT/DS316/42)  
1.1.  The Chairman  drew attention to the communication from the United States contained in 
document WT/DS316/42 . He then invite d the representative of the United States to speak.  
1.2.  The representative of the United States  said that t he Arbitrator in this matter ha d released its 
decision as to the level of countermeasures commensurate with the adverse effects caused by the 
subsidies of the EU, including its memb er States Germany, France, Spain and the United Kingdom, 
to large civil aircraft . That figure was nearly US$7.5 billion  each year . The level determined by the 
Arbitrator was larger by far than the largest amount previously awarded by a WTO Arbitrator , and 
document ed the point that the United States  had been making all along – that the EU 's subsidies to 
Airbus ha d, for decades , caused massive harm to the US economy . Accordingly, the United States 
had requested DSB  authorization to impose countermeasures under Article 7.9 of the SCM 
Agreement and Article 22.7 of the DSU consistent with the Award . It was the preference of the 
United States to find a negotiated outcome with the EU that would end all WTO -inconsistent 
subsidies . That ha d been the objective  of the United States  from the outset . But that c ould only 
happen if the EU genuinely terminate d the benefits to Airbus from current subsidies and ensure d 
that subsidies to Airbus c ould not  be revived under another name  or another mechanism . For 
15 years, the United States ha d indicated its desire for such an agreement . During this period, there 
had been no countermeasures, and the EU ha d consistently failed to engage in serious discussions . 
The United States hoped the c ountermeasures w ould encourage the EU to agree to a genuine 
cessation of its WTO -inconsistent subsidies and the adverse effects that flow ed from them . 
Accordingly, the United States was now reques ting authorization to impose countermeasures.  
1.3.  The representative of the European Union  said that the EU took note of the decision of the 
Arbitrator  in this dispute, and the level of possible countermeasures . This decision mark ed another 
milestone in the 15 -year-long aircraft  saga. Parties  would reach another milestone of this saga with 
the upcoming decision in the Arbitration proceedings in the "US – Large Civil Aircraft ( second  
complaint) " dispute (DS353) . The EU would  provide more information about the bigger picture later  
in its statement , but th is report  warrant ed a closer look  as it raised serious concerns . Having 
reviewed the report , the EU  was compelled to observe that it disagree d with the report  on the basis 
of which the U nited States  had put forward its request at the present meeting.  In this respect, the 
EU noted, in particular, the following . First, there was no analysis whatso ever in the report  of the 
amount of benefit or the alleged price effects . The alleged volume effects were largely based on the 
assumption that Airbus or its pro ducts should not exist . Notably, the parties  were told that, without 
the measures, the A380 would never have been launched . This conclusion was at odds with the facts 
and evidence and d id not accurately reflect the prior findings of the Appellate Body . The assertion 
of the US Trade Representative – in the press release issued upon the publication of the Award  – WT/DSB/M/435  
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  which claim ed that "the Appellate Body agreed that '[w]ithout the subsidies, Airbus would not have 
existed ... and there would be no Airbus aircraft  on the market '", had no basis in the Appellate Body 
rulings previously adopted in the course of this dispute . Second, awarding recurring annual 
countermeasures for an indefinite period in response to non -recurring measures, the benefit and 
adverse effects of which were constantly diminishing, was a breach of the rule foreseen in the 
SCM Agreement that countermeasures must be commensurate with the degree and nature of 
adverse effects, and contradict ed the e xisting case law . The Award of recurring annual 
countermeasures was all the more striking with respect to the A380 even though the Arbitrator  knew 
that the A380 programme ha d been terminated . This ignore d the principle of representativeness, 
led to counter measures that were not commensurate with the adverse effects, and contradict ed the 
Members' long -held view – which had been  confirmed by the U nited States itself during the 
proceeding – that compliance obligations were prospective only . Third, the Award  disregard ed the 
risk of over -counting resulting from cumulating nullification or impairment from both orders and 
deliveries at the same time . This disregard ed the basic principles of economic valuation and again 
led to countermeasures that were not commensur ate with the adverse effects . Fourth, the Award  
contain ed a finding that the hypothetical impedance associated with the six country markets where 
impedance had been  found coincide d with the total number of aircraft s [47] that Airbus had sold in 
those markets, without any effort by the United States to substantiate that assertion . Fifth, the 
Award systematically avoid ed taking into account the treaty terms that refer red to the "no -subsidised 
like product", which clearly support ed the view that the volum e effects of competing subsidies 
cancel led each other out.  
1.4.  The E uropean Union  said that i n the "US – Large Civil Aircraft  (second complaint)" dispute 
(DS353),  the EU had already obtained multilateral findings that the United States was out of 
compliance wi th respect to both Washington State tax subsidies and F oreign Sales Corporation (FSC)  
legislation . It was currently pursuing its own proceedings under Article 22.6 of the DSU against the 
United States in the "US — Large Civil Aircraft ( second  complaint)" ( DS353 ) dispute . With respect 
to the same issues, the same principles w ould be applied in that case . From a systemic point of view, 
in order to provide security and predictability to the multilateral trading system, and not least for 
the sake of procedural fairness, that was the only acceptable course to follow . Unlike the 
United  States, the EU had made a substantial further effort to comply that was currently under 
consideration by a second compliance panel . The result of that proceeding w ould shortly be kn own. 
The EU would be insisting that, as a matter of law, the outcome of that proceeding was fully and 
immediately reflected in the level of sanctions imposed by the United States . Finally, the EU  had 
taken very careful note of the Arbitrator's repeated and  heavy reliance on the proposition that, as 
long as the defending Member was "out of compliance", because it did not have a multilateral 
determination of compliance, or a mutually agreed solution, or an unconditional and unequivocal 
acknowledgement of comp liance from the complainant, the full amount of any retaliation remain ed 
due. The EU  recall ed in this respect that the possibility of a "multilateral determination of compliance " 
would be at serious risk in the very near future in the absence of a function ing multilateral dispute 
settlement system, and the United States b ore the responsibility if that situation were to materiali ze. 
The content of this report demonstrate d why the existence of appellate review of legal issues was 
essential within the WTO system . The EU  was continuing to review the report  and fully reserve d its 
right to challenge its findings at the appropriate time and in the appropriate forum . Unlike the 
United  States, the EU  well underst ood that, even if it strongly disagree d with the report  that formed 
the basis of the US request, it could not prevent the DSB from granting authorization to suspend 
concessions or other obligations consistent with this Award , absent a DSB decision by consensus to 
reject the reques t, because that authorization w ould be granted automatically or by operation of law 
(that is, ipso jure ). Nevertheless, the EU  wished to reiterate  that it disagree d with the content of the 
Award , including for the reasons outlined above . The EU  would monit or very closely the application 
of the US countermeasures and call ed on the U nited States to respect the level authorized by the 
WTO. In conclusion, the EU wished to reiterate  that it remain ed of the view that even if the 
United States obtain ed authori zation from the DSB at the present meeting , opting for applying its 
countermeasures at this moment would be short -sighted . Both the EU and the U nited States had 
been found at fault by the dispute settlement system  of the WTO . In the parallel "US – Large Civil 
Aircraft ( second complaint)" dispute (DS353) , the EU w ould in some months equally be granted right 
to impose additional countermeasures . The mutual imposition of countermeasures, however, would 
only harm global trade and the broader aviation in dustry . As the EU  had consistently stated, it 
remain ed ready to work with the United States on a fair and balanced solution for  their respective 
aircraft industries . Pending progress in finding such a solution, and while reserving its rights in this 
regard , it was not the EU's  intention to seek reporting from the United States with respect to any of 
the above matters.  WT/DSB/M/435  
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  1.5.  The representative of Canada  said that his country had a significant interest in both the 
substantive and procedural issues raised in this di spute and that Canada  had, since the beginning, 
participated as a third party . Canada also ha d a significant systemic interest in ensuring the fair and 
effective operation of the dispute settlement system at all stages of proceedings . This include d the 
authorization of suspension of concessions, a fortunately rare but nonetheless an important momen t 
in a dispute , and an authorization  that should be used with the greatest of caution . Canada  wished 
to make a statement  at the present meeting principally on the  question of the  jurisdiction of 
Arbitrators convened under Article 22.6 of the DSU to conside r measures taken to comply after the 
request for authorization to retaliate ha d been referred to arbitration . This was a difficult issue, one 
that ha d been considered in the DSU Review, but also one that Members had needed to confront 
with increasing frequ ency in recent years . Canada was sympathetic to the concerns expressed by 
the European Union in the arbitration that, if an Arbitrator did not take into account subsequent 
compliance measures and market developments, it might well end up determining a leve l of 
nullification and impairment that was, in fact,  not equivalent to the present level of nullification and 
impairment . And this m ight be especially consequential in circumstances involving the valuation of 
adverse effects under the SCM Agreement . Noneth eless, Canada  acknowledge d that requiring an 
Arbitrator to await the outcome of subsequent compliance proceedings, or to engage itself in a 
review of claims of compliance, would blur the role of Arbitrators with that of compliance panels . To 
impose  such re quirement s only on the basis of a claim of compliance – however objective and 
ultimately well -founded – would risk subjecting the parties, especially the complaining party, to an 
endless loop of litigation without ever getting closer to a resolution . That said, Canada consider ed 
that an Arbitrator should calculate the level of countermeasures in a manner that allow ed for 
calibration in the future, based either on additional compliance steps taken by the responding 
Member or on subsequent ma rket developments . Canada, therefore, consider ed it unfortunate that 
the Arbitrator in this dispute had declined to determine separate levels of countermeasures for the 
different product markets at issue . In addition, Canada note d that, while the United St ates ha d the 
right to receive authorization to retaliate at a level that was calculated appropriately based on the 
latest multilateral determination of non -compliance, it also had to use that authorization responsibly . 
It should not simply ignore subsequen t measures taken to comply or market developments that 
might affect compliance, such as Airbus 's decision to terminate the A380 program me. Ultimately, 
the purpose of authorized retaliation was to induce compliance . If there was evidence of compliance, 
even if partial, the authorized party had to  take that into account when using its retaliation rights . 
Canada,  therefore , called upon the United States in this dispute to use restraint when imposing 
retaliation under the authorization it w ould receive at the p resent meeting . The health of an 
increasingly integrated aircraft industry, the global economy and the dispute settlement system 
depend ed upon it . More systemically, as was the case in other areas of the dispute settlement 
system, the rules c ould not  be ex pected to regulate precisely every possible scenario . Much still 
depend ed, and always w ould depend, on the good faith and good will of the parties . Canada, 
therefore, encourage d both parties to bring this dispute, as well as their related dispute, 
to resolution.  
1.6.  The DSB took note of the statements and, pursuant to the request by the United States under 
Article 7.9 of the SCM Agreement and Article 22.7 of the DSU contained in document WT/DS316/42, 
agree d to grant authorization to suspend the application  to the European Union and certain member 
States of tariff concessions or other obligations consistent with the Arbitrator's decision contained in 
document WT/DS316/ARB.  
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