WORLD TRADE  
ORGANIZATION  RESTRICTED 
WT/DSB/M/297 
11 July 2011 
 (11-3404) 
Dispute Settlement Body 
1 June 2011  
 
 
 
MINUTES OF MEETING 
 
Held in the Centre William Rappard 
on 1 June 2011 
 
Chairperson:  Mrs. Elin Østebø Johansen (Norway) 
 
 
1. European Communities1 and certain member States – Measures affecting trade in large 
civil aircraft 
(a) Report of the Appellate Body (WT/DS 316/AB/R) and Report of the Panel 
(WT/DS316/AB/R) 
1. The Chairperson drew attention to the comm unication from the Appellate Body contained in 
document WT/DS316/15 transmitting the Appellate Body Report on:  "European Communities and 
Certain Member States – Measures Affecting Trade in Large Civil Aircraft", which had been 
circulated on 18 May 2011 in document WT/DS316 /AB/R, in accordance with Article 17.5 of the 
DSU.  She reminded Members that the Appellate Bo dy Report and the Panel Report pertaining to this 
dispute had been circulated as unrestricted documents.  She noted that, as Members were aware, Article 17.14 of the DSU and Artic le 7.7 of the SCM Agreement, as applicable in this case, required 
that an Appellate Body report shall be adopt ed by the DSB and unconditionally accepted by the 
parties to the dispute unless the DSB decides by consensus not to adopt the Appellate Body report 
within 20 days following its circulation to Member s.  This adoption procedure was without prejudice 
to the right of Members to express their views on an Appellate Body report.  
2. The representative of the United States said th at his country thanked the members of the 
Panel, the Appellate Body, and th e Secretariat staff assisting them for their hard work during this 
lengthy proceeding.  Six years ago, almost to th is very day, the US representative had explained 
before the DSB the problem facing the US large civil aircraft (or "LCA") industry.  At that time, the 
United States had stated that it was concerned that certain measures of France, Germany, the 
United Kingdom, Spain, and the EU provided subsidies that were inconsistent with their obligations 
under the SCM Agreement and the GATT 1994.  Over its 35 year history, Airbus had benefitted from 
massive amounts of EC member State and EC subsid ies that had enabled the company to create a full 
product line of aircraft and gain more than a 50 pe r cent share of large civil aircraft sales.  Every 
major Airbus aircraft model had been financed, in whole or in part, with government subsidies taking 
the form of "launch aid", i.e. with no or low ra tes of interest, and repayment tied to, and entirely 
dependent on, sales of the financed aircraft.  Moreove r, if a particular model did not sell well, Airbus 
                                                      
1 On 1 December 2009, the Treaty of Lisbon amendi ng the Treaty on Europe an Union and the Treaty 
establishing the European Community (done at Lisbon, 13 December 2007) entered into force.  On 
29 November 2009, the WTO received a verbal note (WT/L/779) from the Council of the European Union and 
the Commission of the European Communities stating that, by virtue of the Treaty of Lisbon, as of 
1 December 2009, the European Union replaces and succeeds the European Community. WT/DSB/M/297 
Page 2  
 
  did not have to repay the financing.  The Airbus A380 "super jumbo" alone had received 
approximately US$3.7 billion in launch aid subs idies from France, Germany, Spain, and the 
United Kingdom.
2  That situation prevailed to the presen t day unchanged.  Airbus was now into its 
fifth decade of benefitting from the massive amounts of market distorting launch aid on past models.  Furthermore, Airbus retained its leading global presence in the market for large civil aircraft.  
3. The Panel and the Appellate Body Reports  had vindicated the US position by speaking clearly 
on this point that every single grant of launch aid to Airbus over four decades had conferred a subsidy 
that had caused adverse effects to the United St ates.  The Appellate B ody had taken a slightly 
different approach from the Panel but had found th at under any valid measurement, the terms the EU 
governments had offered Airbus for launch aid sup port had been more favourable than a commercial 
lender would have offered.  And the amounts of launch aid to Airbus  were enormous.  The Panel had 
found that launch aid payments prior to 2000 had amounted to US$10.5 billion dollars.
3  Public data 
indicated that at the current exchange rates, la unch aid for the A380 alone came to US$4.3 billion.  
The Panel had concluded that launc h aid was fundamental to Airbus' ability to launch and bring to 
market each of its models of large civil aircraft when and as it did.  The Appellate Body had 
confirmed this conclusion for each Airbus model.4  The Appellate Body had stated that "either 
directly or indirectly, LA/MSF was a necessary pr econdition for Airbus' launch in 2000 of the A380"5 
and that "it would not have been possible for Air bus to launch the A380 in 2000 relying exclusively 
on market financing".6  The Appellate Body had also flatly rejected the EU's arguments that, even 
without launch aid, Airbus could have launched an  A320 type aircraft in 1987 and an A330 type 
aircraft in 1991.7  When it came to the remaining aircraft , the EU itself had conceded that "a non-
subsidized Airbus would not have been able to  launch the A300, A310, and A340 LCA projects by 
the 2001-2006 reference period".8  It was no exaggeration to say th at the Reports had concluded that, 
without launch aid, Airbus and its family of aircra ft would not have existed as they were known at 
present.  The Panel and the Appellate Body had al so been clear on the immensity of the adverse 
effects suffered by the US large civil aircraft industr y.  The Reports found that subsidies to Airbus had 
caused lost market share in some of the biggest aircraft markets in the world, including Europe and 
China.  The Reports also confirmed that Boeing, the US LCA manufacturer, had lost sales amounting to hundreds of aircraft in sales campaigns involving ten major airlines.  The finding of lost sales of 
hundreds of aircraft was particularly significant in light  of the fact that the yearly output of the US 
industry was 300-400 aircraft.  
4. European subsidies did not stop with launch aid.  The Panel and the Appellate Body had 
upheld US claims regarding a number of other paymen ts that the EU and four of its member States 
had made to Airbus on subsidized  terms and had found that those pa yments had worked with launch 
aid to harm the US industry.  The Appellate Body  had confirmed that France and Germany subsidized 
Airbus by giving it equity financing worth US$1. 6 billion at a time when no commercial investor 
would have made such investments.
9  The Appellate Body had found that EU member States had 
provided WTO-inconsistent subsidies to Airbus through infrastructure payments worth more than 
US$1.2 billion.  For example, the government of the German city of Hamburg had paid approximately 
                                                      
2 See WT/DSB/M/191, para. 2.   
3 EC - Large Civil Aircraft (Panel), para. 7.380. 
4 EC - Large Civil Aircraft (AB), paras. 1300, 1352, 1356, 1368, 1377, 1378, 1414(q). 
5 EC - Large Civil Aircraft (AB), para. 11414(q). 
6 EC - Large Civil Aircraft (AB), para. 1352. 
7 EC - Large Civil Aircraft (AB), paras. 1298-1300. 
8 EC - Large Civil Aircraft (AB), para. 1273. 
9 EC - Large Civil Aircraft (Panel), para. 7.108 9 and 7.1101;  EC - Large Civil Aircraft (AB), 
paras. 984-993.  WT/DSB/M/297 
 Page 3 
 
 
  €750 million to drain a wetland next to Airbus' fact ory and had then charged Airbus below-market 
rent for use of that land to produce the A380.10   
5. Together, launch aid and other subsidies added up to some US$18 billion in payments that the 
market would not have made, that had benefitted Ai rbus, and that had caused serious prejudice to the 
US large civil aircraft industry and to US interest s.  In economic terms, the adverse effects of lost 
market share and lost sales far exceeded the value of  those payments.  In finding that those subsidies 
had violated WTO rules, the Panel and the Appella te Body had affirmed what the United States had 
told the DSB, six years ago, that launch aid had conferred an immense subsidy on Airbus that had 
caused real and serious commercial harm to US inte rests.  Other subsidies had contributed to that 
harm by allowing Airbus to develop and brin g to market its aircraft when and as it did. 11   
6. The United States also took note of reports that Airbus was currently receiving launch aid for 
its newest aircraft, the A350.  The findings from the Panel and the Appellate Body, however, should 
make it clear to the EU, its member States, and to  Airbus that a "business as usual" approach to 
funding Airbus was no longer acceptable.  Now that the DSB was ready to adopt these recommendations and rulings, it was time to start thinking about how to move forward.  The 
United States was confident that, in light of the long  history of WTO-inconsiste nt adverse effects that 
launch aid and other subsidies had created, the EU and its member States would move quickly to 
comply with their obligations to withdraw the subsid ies or remove their adverse effects within the six-
month period provided under Article 7.9 of the SC M Agreement.  The United States remained ready 
to work with the EU and the member States to achieve that end. 
7. The representative of the European Union said that the EU thanked the members of the 
Appellate Body, the panelists and the Secretaria t for their work on this case.  Although the EU 
regretted the finding of actionable subsides in this case,  in particular despite the fact that the EU had 
always meticulously complied with its bilateral 1992  agreement with the United States regulating the 
contested measures, it nonetheless welcomed the Appe llate Body Report that corrected a number of 
errors committed by the Panel.  The EU was already satisfied with a number of findings of the Panel 
Report in this case.  In particular, the Panel had rejected a number of the US export subsidy claims, 
had found that loans from the European Investment  Bank were not actionable subsidies, and that a 
market-based debt settlement in Germany had conferred no benefit to Airbus.  The Panel had also 
confirmed the non-specificity of certain EU resear ch and development (R&D ) and regional schemes.  
On adverse effects, the EU welcomed the Panel's fi ndings that Boeing had not suffered material injury 
and that the EU support measures had no price effects whatsoever.  Finally, both the non-existence of 
any alleged subsidy programme and the exclusi on of the A350 from this proceeding had been 
confirmed.  However, while the Panel had dismissed many of the US claims, many of its findings of 
subsidy and adverse effects remained a cause for con cern and the EU had, therefore, appealed them.  
The Appellate Body had reversed the findings that export subsidies had been granted to Airbus and 
had usefully clarified the standard for de facto  export contingency under Article 3 of the SCM 
Agreement.  The EU fully agreed with the rationale and content of this refined test.  It was in line with 
the objective of prohibiting subsidies, which were trade distorting by objective design, rather than by 
subjective intention, and it provided legal certainty to Members by establishing an objective and workable standard. 
8. The Appellate Body had also corrected the Pa nel's incorrect approach when examining the 
relevant transaction for the financial contributi on determination and analysing the provision of 
infrastructure applying a "cost to the government" standa rd.  It had also confirmed that, with this type 
of measure, the examination of whether there was a benefit to the recipient was the correct approach 
under the SCM Agreement.  That was an important  finding from a public policy perspective and the 
                                                      
10 EC - Large Civil Aircraft (AB), paras. 995 and 998-1012. 
11 EC - Large Civil Aircraft (AB), para. 1414(r). WT/DSB/M/297 
Page 4  
 
  role of governments in that context.  The EU also  welcomed the reversal of the Panel's finding that 
certain research and technology development (R&TD)  programmes had caused adverse effects.  In 
that regard, the EU pointed out to the reasoning of  the Appellate Body, according to which it must be 
demonstrated that technology or production pr ocesses funded by R&TD had contributed to a LCA 
manufacturer's ability to launch and bring to the market particular models of LCA.  It was not 
sufficient to make generalized allegations about the e ffect of such subsidies.  The Appellate Body had 
also made important corrections to the reasoni ng of the Panel for establishing the benefit under 
Member State Financing (MSF).  It had rejected the US interest rate benchm ark as being too high, and 
had confirmed that MSF financing was significantly less risky than the United States had alleged.  
The EU also welcomed the Appellate Body's findings on excluding the US claim of MSF "as a 
programme" from the scope of the proceedings for ju risdictional reasons.  That being said, the EU 
noted that the Panel had correctly rejected this cl aim on substance as well.  With those findings, it was 
now crystal clear that MSF did not constitute a "subs idy programme".  The mere fact that this loan 
instrument was used in a particular  instance, in the past or in the future, did not have any bearing on 
the issue of whether it constitu ted an actionable subsidy. 
9. The Appellate Body Report also contained importa nt findings on the concepts of extinction of 
benefits, and the passage of time.  The EU welcom ed, in particular, that the Appellate Body had 
recognized that changes in ownership in the subsidy recipient affected the evaluation of subsidization, 
and that both the effects of a subsidy and the s ubsidy itself dissipated over time.  The EU also 
welcomed the Appellate Body's reversal of the subsidy findings in the case of the French government's transfer of its shar es in Dassault to Aérospatiale, in the context of the latter's 
privatization.  Concerning the findings of adver se effects, the Appellate Body had confirmed that it 
was for the Panel, as the first trier of facts, to defi ne the subsidized product, and the market in which it 
competed with the corresponding product.  It had confirmed the EU's long-standing argument that there was not "one" LCA market but rather a number of  distinct markets.  While the EU noted that the 
Appellate Body had found that there were some a dverse effects caused in the reference period, the 
scope of the adverse effects had been significantly reduced. 
10. The EU believed that this case was, and rema ined, exceptional in various ways, not least 
because of its complexity and length.  The same wa s true for the case in which the EU challenged US 
measures in the same sector, and where there woul d be an opportunity to comment on the Panel and 
the Appellate Body findings in the near future.  This case had also shown that the WTO dispute 
settlement system was capable of adjudicating disput es of this kind while ensuring the protection of 
highly sensitive information and transparency throug h open hearings and publication of submissions 
at the same time.  Finally, at the present meeting,  the EU had again heard a figure of US$18 billion in 
launch aid subsidies as stated by the United Stat es.  The figure mentioned by the United States 
appeared to be based on the principal amount of repayable MSF loans.  That figure had no relation whatsoever to the amount of subsidy given under a loan, where the benefit was merely the difference 
between actual payments and those on comparable te rms on the market.  The EU wished to point out 
the fact that neither the Panel Report nor the Appella te Body Report contained a quantification of the 
subsidy amounts granted.  In any event, any subsid y benefit would nowhere be near the fantasy-figure 
mentioned again at the present meeting. 
11. The representative of China said that her country  thanked the Appellate Body, the Panel, and 
the Secretariat for their work in th is dispute.  China had participated  as a third party in this dispute 
because it had considered that the dispute raised important questions  of legal interpretation under the 
SCM Agreement.  China noted that the Appellate Body Report had made a significant contribution to 
the interpretation of subsidy disciplines, including, inter alia , systemic issues related to the life of a 
subsidy, the infrastructure measures, the export subs idies and the determination of serious prejudice.  
China was pleased to see that for most of these is sues, the Appellate Body had, to a great extent, 
concurred with China's views presented in the proceedings.  China supp orted and welcomed the 
adoption of the Panel and the A ppellate Body Reports at the pr esent meeting and hoped that, for  WT/DSB/M/297 
 Page 5 
 
 
  subsidies found to be inconsistent with the SCM Ag reement, appropriate steps would be taken by the 
EU to withdraw them, or to remove the adverse ef fects caused by them, so  as to ensure that the 
industries of other Members did no longer suffer from such adverse effects. 
12. The representative of Brazil said that his country thanked the Panel, the Secretariat, the 
members of the Appellate Body, and the Appellate Body  Secretariat for their hard  work in this dispute 
and for preparing the Reports, which were before  the DSB for adoption at the present meeting.  
Brazil's participation in this dispute as a third part y stemmed from its long-standing systemic interest 
in the interpretation of the SCM Agreement , in particular with respect to the civil aircraft industry.  
Brazil was and continued to be concerned about the distortive effects of subsidies of a particularly 
pernicious nature such as the launch aid measures that were at issue in this case.  At the present 
meeting, Brazil wished to address three issues in the Appellate Body Report:  (i) the interpretation of 
"benefit" under Article 1 of the SCM Agreement  and its application to some facts of this case;  (ii) de 
facto export subsidies under Article 3.1(a) and foot note 4 of the SCM Agreement;  and (iii) the 
analysis of serious prejudice.   
13. With regard to the issue of "benefit", Brazil welcomed some clarifications provided by the 
Appellate Body in respect of financial instruments such as loans.  Accordi ng to the Appellate Body, 
"[b ]ecause the assessment focuses on the moment in time when the lender and borrower commit to 
the transaction, it must look at how the loan is stru ctured and how risk is factored in, rather than 
looking at how the loan actually performs over time.  Such ex ante analysis of financial transactions is 
commonly used and appropriate financial mode ls have been developed for these purposes."12  I n  
Brazil's view, this statement and the explanations  were entirely appropriate.  For the purposes of a 
benefit analysis undertaken against the context of Article 14(b), they meant that, in determining the 
terms of a comparable commercial loan that the bor rower could obtain in the market, one must take 
the ex ante perspective of a commercial lender.  This incl uded how that lender would factor in the risk 
of the transaction, looking forward.  The measure of this risk was thus an objective one, and would not depend, for instance, on the particular histori cal experience of the govern ment that provided the 
loan.  In Brazil's view, the same logic would apply to the assessment of loan guarantees under 
Article 14(c).  
14. Brazil also welcomed the Appellate Body's finding  that the rate of return demanded by risk-
sharing suppliers in a project that benefitted fro m launch aid could not serve as a valid benchmark for 
the benefit analysis.
13  This was a proposition that Brazil had advanced before the Panel based on a 
reasonable argument that if launch aid worked to shift part of the risk of the project to the 
governments, there would be less risk for risk-sharing suppliers to "share".  Their terms, therefore, 
could not be reflective of what market-based opera tors would demand in the absence of launch aid.  
The Panel had agreed, and Brazil was pleased that the Panel's findings had been upheld by the 
Appellate Body.  
15. Turning to export subsidies, and in particular to the issue of de facto export contingency, 
Brazil wished to highlight some of its concerns with the interpretation de veloped by the Appellate 
Body and its application to the facts of this  dispute.  Footnote 4 of the SCM Agreement  provided that 
a subsidy was in fact contingent on export perform ance when the granting of the subsidy was in fact 
"tied to (...) anticipated exportation or export earnings ".  The Appellate Body had stated in turn that, 
when the relationship of conditionality between the granting of a subsidy and anticipated exportation 
was not expressly or by necessary implication provide d in the law, the "factual equivalent" of such 
conditionality could be established by recourse to th e following test:  "is the granting of the subsidy 
geared to induce the promotion of future export performance by the recipient?"14  The Appellate Body 
                                                      
12 Appellate Body Report (WT/DS316/AB/R), para. 836. 
13 Appellate Bod y Report (WT/DS316/AB/R),  paras . 896-922 . 
14 Appellate Body Report (WT/DS316/AB/R), para. 1044. WT/DSB/M/297 
Page 6  
 
  had explained that the standard for de facto export contingency would be met when the subsidy was 
granted "so as to provide an incentive to the recipien t to export in a way that is not simply reflective 
of the conditions of supply and demand in th e domestic and export markets undistorted by the 
granting of the subsidy".
15  
16. The Appellate Body had explained that the assessment could be based on a comparison 
between, "on the one hand, the ratio of anticipated  export and domestic sales that would come about 
in consequence of the granting of the subsidy and, on the other hand, the situation in the absence of 
the subsidy.  The situation in the absence of the s ubsidy may be understood on the basis of historical 
sales of the same product by the recipient (...) before  the subsidy was granted.  In the event that there 
are no historical data untainted by the subsidy, or the subsidized product is a new product (...), the 
comparison could be made with the performance th at a profit-maximizing firm would hypothetically 
be expected to achieve in the export and domestic ma rkets in the absence of the subsidy.  (...) The 
granting of the subsidy will not be tied to anticipated  exportation if, all other things being equal, the 
anticipated ratio of export sales to domestic sales is not greater than the existing ratio".16  In Brazil's 
view, there were a number of problems with those statements.  Brazil noted that, according to the 
standard formulated by the Appellate Body in this di spute, in order to demonstrate that the granting of 
a subsidy was in fact "tied to" anticipated exportati on, it was not sufficient to establish a "tie" between 
the granting of the subsidy and expected exports.  Rather, one would have to demonstrate that the 
subsidy provided an incentive  to export, and more than that, an incentive to export in a way  "that is 
not simply reflective of the conditions of suppl y and demand in the domestic and export markets 
undistorted by the granting of the subsidy".  That, however, could be an unwar ranted requirement, and 
one that was likely to lead to incongruous  results.  The text of the SCM Agreement  did not only 
prohibit subsidies "contingent upon the substitution of  domestic sales by export sales", as seemed to 
have been the new test introduced by the Appellate Body.  Nor was there any basis in the text of the 
SCM Agreement or in the jurisprudence developed by the Appellate Body for imposing a different 
legal standard for de facto export contingency.   
17. It was not clear whether the findings of the Panel and the Appellate Body in the "Canada - 
Aircraft" dispute, for instance, would stand in light of the test now set out by the Appellate Body.  The evidence in that dispute had revealed that "funding in the regional aircraft sector is expressly designed 
and structured to generate sales of particular products, and that the Canadian government expressly 
takes into account, and attaches considerable importan ce to, the proportion of those sales that will be 
for export, when making TPC contributions in the regional aircraft sector".17  The Panel had not 
sought to elucidate what would be the proportion of exports to domestic sales that would come about 
as a result of the subsidy, nor what that proportion w ould have been had the subsidy not been granted.  
Those proportions might well not  have been different, in which case the original TPC, which had been 
found to be an export subsidy in th at dispute, would not have been an export subsidy according to the 
standard articulated by the Appellate Body in this dispute.  Furthermore, this new standard appeared 
to imply that, by definition, subsidies provide d to enterprises that only exported could never  be found 
to be in fact contingent on export performance,  no matter how much factual evidence a complainant 
amassed to challenge those measures.  That was be cause the ratio of domestic to export sales would 
always be the same, zero, with or without the su bsidy because the firm only exported.  Thus, even 
where a subsidy worked in such a way that its provision was conditioned, for example, on a showing of growing export sales, thus being by any reasonabl e standard "contingent on export performance", 
such a demonstration would not meet the Appellate Body's new test for de facto export contingency.   
18. There was a further problem related to the appli cation of this standard to the facts of this 
dispute.  The Appellate Body had found that, in or der to demonstrate that the granting of subsidies 
                                                      
15 Appellate Body Report (WT/DS316/AB/R), para. 1045. 
16 Appellate Body Report (WT/DS316/AB/R), paras. 1047-1048.  (Emphasis in the original.) 
17 Panel Report, Canada - Aircraft, para. 9.341.  (Underlining in the original.)  WT/DSB/M/297 
 Page 7 
 
 
  under some of the launch aid contracts at issue had in fact been tied to anticipated export sales, the 
Panel would have had to de termine whether the fact that Airbus was anticipated to make a significant 
number of exports in order to repay the loans woul d not be "simply reflectiv e of conditions of supply 
and demand undistorted by the granting of the subsidies".18  In light of its standard, the Appellate 
Body had affirmed that the factual record of the Panel had left the following question unanswered:  
"[at] what level would Airbus be anticipated  to sell in the domestic and export markets undistorted by 
the granting of the subsidies under the [launch aid] contracts in question?"19 
19. In Brazil's view, however, the Panel record had not contained the answer to this question, at 
least in respect of the A380.  In fact, the Appella te Body itself had upheld the Panel's conclusion that 
"the launch of the A380 would not have  occurred in 2000 without [launch aid]".20  Thus, the levels 
that Airbus would have anticipated to sell, measure d in number of A380 aircraft, in the domestic and 
export markets undistorted by the granting of the su bsidies, would have been respectively zero and 
zero.  The application of the Appellate Body's test of  comparing two proportions would then involve a 
comparison between, on the one hand, the anticipated  ratio of exports to domestic sales that would 
result if launch aid were granted, as reflected in Airbus' forecasts and, on the other hand, the ratio 
between zero and zero which, as was known, was a mathematical indeterminacy.  In sum, it was 
Brazil's view that the standard articulated by the Ap pellate Body in this dispute departed significantly 
from the text of the SCM Agreement  and this was not without serious consequences.  The comparison 
called for by the Appellate Body potentially involv ed the assessment of hypothetical scenarios on 
both sides of the equation.  This had the potential not only to increase the room for exercises of a 
speculative nature but it may also make it impossi ble to undertake a demonstration that otherwise 
could find direct support in the text of the SCM Agreement.  
20. Finally, Brazil wished to address the Appellate  Body's findings with respect to the US 
allegations of serious prejudice.  Brazil considered  problematic the Appellate Body's conclusion that 
the term "market" in the context of a serious prej udice analysis referred to both a geographic and a 
product market.  The Appellate Body had found that  "a panel is required to make an objective 
assessment of the competitive relationship between specific products in the marketplace and to define 
the relevant product market in order to determin e whether particular products can be treated as 
forming part of a single product market or several product markets for purposes of an analysis of displacement under Article 6.3(a) and 6.3(b)".
21  It had further found that "the notion of 'subsidized 
product' and 'like product' is, in each case, to be analysed as an integral part of a panel's duty 
objectively to assess a particular claim of serious  prejudice and its obligation to assess the relevant 
market".22  Brazil was of the view that the text of Article 6.3 of the SCM Agreement clearly referred 
to a geographic market only.  Furthermore, there was no textual guidance regarding the definition of 
the "subsidized product" in the SCM Agreement , and the definition of a "like product" was focused on 
the "essential characteristics" of the product in compar ison with the subsidized product.  There did not 
appear to be a textual basis to require panels to examine the appropriateness of a complainant's 
definition of the "subsidized" and the "like" pr oduct "under the discipline of the product market"23 as 
required by the Appellate Body.  Brazil considered that the introduction of concepts and approaches 
that appeared to be derived from competition la w in a trade agreement like the SCM Agreement  was 
unwarranted and imposed an undue  burden on complainants as we ll as panels, ill-suited to conduct 
such a competition-like analysis.  
                                                      
18 Appellate Body Report (WT/DS316/AB/R), para. 1091. 
19 Appellate Body Report (WT/DS316/AB/R), para. 1098.  (Emphasis in the original.) 
20 Appellate Body Report (WT/DS316/AB/R), para. 1355. 
21 Appellate Body Report, para. 1123. 
22 Appellate Body Report, para. 1131. 
23 Appellate Body Report, para. 1119. WT/DSB/M/297 
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  21. On a different note, and turning to the analysis of causation, he said that Brazil appreciated 
the Appellate Body's recognition that, in this dis pute, the issue was one of assigning probabilities to 
the particular scenarios outlined by the Panel, and that the Panel's findings regarding the different 
probabilities associated with them were important in  determining the extent to which the Panel was 
required to further pursue the counterfactual analysis .  In the end, the Appellate Body had confirmed 
that, in this unique market, characterized by consid erable barriers to entry and very large sunk costs 
for product development, launch aid subsidies could en able the launch of aircraft at a time and in a 
manner that would not be possible in the absence of su ch subsidies.  That was sufficient to establish a 
causal link with the displacement of imports or with  lost sales that might be experienced as a result of 
competition with such subsidized products.  Braz il welcomed those findings and believed they would 
help safeguard the disciplines of the SCM Agreement  in a way that contributed to ensuring a level 
playing field, where manufacturers could develop products and compete with each other on the basis 
of their own strength, and not on the basis of the leverage provided by national treasuries.  
22. The representative of Canada said that her country  thanked the Panel, the Appellate Body and 
the Secretariat for their work in these proceedings.  Canada was a third participant in this dispute due 
to its role as one of the world's major producers of  civil aircraft and its systemic interest in the 
interpretation of the SCM Agreement.  At the present meeting, Canada wished to briefly register its 
views on three systemic issues considered by the Ap pellate Body:  (i) the test for export contingency 
in Article 3.1(a) of the SCM Agreement;  (ii) wh ether a subsidy must confer a benefit during the 
reference period for a "serious prejudice" claim;  and (iii) when was a subsidy de jure  specific under 
Article 2.1(a) of the SCM Agreement.  First, Ca nada welcomed the Appellate Body's adoption of a 
rigorous test to demonstrate de facto  prohibited export subsidization under Article 3.1(a) of the SCM 
Agreement.  Under that test, a subsidy was export c ontingent if the granting of the subsidy was geared 
to induce the promotion of future export performance by  the recipient.  In Canada's view, such a test 
appropriately shifted the focus of the export contin gency analysis away from an examination of the 
granting authority's motivation for providing the subsidy, which was the approach adopted by the 
Panel, to an examination of whether the subsidy provided the recipient with an incentive to favour 
exports.  However, with respect to serious prej udice, Canada was disappointed that the Appellate 
Body had found that the benefit conferred by a fina ncial contribution did not need to continue during 
the reference period to permit a finding that the s ubsidy caused serious prejudice during that period.  
The Appellate Body's finding appear ed inconsistent with the specific use of the term "subsidized 
product" in Article 6 of the SCM Agreement.  Mo reover, the Appellate Body's interpretation meant 
that a subsidy could give rise to an endless potential exposure to challenge under the SCM 
Agreement.  Finally, Canada was concerned about the Appellate Body 's finding that the allocation of 
funding to certain enterprises in a subsidy programme's budget could result in de jure  specificity 
under Article 2.1(a) of the SCM Agreement irresp ective of how other funding under that subsidy 
programme was distributed.  The Appellate Body's finding appeared inconsistent with the need for 
overall consistency in the application of the specific ity test under Article 2 of the SCM Agreement.  
Article 2.1(c) of the SCM Agreement required that, in assessing de facto  specificity, the subsidy 
programme as a whole be used as the benchmark of comparison.  That same benchmark should be 
used under Article 2.1(a) of the SCM Agreement. 
23. The representative of Australia said that his country welcomed the findings of the Appellate 
Body in this dispute and the adoption of the Reports  by the DSB at the present meeting.  Australia 
wished to put on the record some important issues arising out of this dispute.  Australia had a keen 
interest in the interpretation of Article 3.1(a) a nd footnote 4 of the SCM Agreement, which pertained 
to export subsidies.  The interpretation of Artic le 3.1(a) and footnote 4 must avoid any potential 
discrimination against small or export-dependent economies, the fi rms of which may have a higher 
export orientation than firms operating in economies w ith large domestic markets.  Where a firm had 
a high export orientation because of the market conditions it was operating under, and this was 
particularly likely for small and export-depende nt economies, that "export propensity" should not 
contribute to a finding of export contingency.  E xport subsidies were prohibited because of their  WT/DSB/M/297 
 Page 9 
 
 
  potential to directly distort international trade.  It was, therefore, imperative that Members, when 
designing public programmes, were clearly aware of the rules that determined whether a particular programme would amount to an export subsidy.  In  its findings, the Appella te Body had developed 
the test for determining export contingency, and th us the test for determining whether a particular 
subsidy amounted to a prohibited export subsidy.  The Appellate Body stated that the following 
question should be asked:  "Is the granting of the subsidy geared to induce the promotion of future 
export performance by the recipient?"  Australia  hoped that this test, expanding as it did on the 
guidance provided by the Appellate Body in the "Canada - Aircraft" dispute, would assist Members and panels in their consideration of whether the gran ting of a subsidy was, in fact, "tied to" anticipated 
exportation and, further, that the application of this test would not discriminate against small or 
export-dependent economies.   
24. Finally, Australia noted the time it had taken to reach this point in the dispute.  Consultations 
in this dispute had begun on 6 October 2004, almost sev en years ago.  Over the years, both the Panel 
and Appellate Body had been requi red to evaluate an enormous qua ntity of evidence and consider 
issues of significant legal and factual complexity .  The resources that had been required by the 
Appellate Body and Panel to hear the dispute, and th e participants and third pa rticipants to participate 
in the dispute, had clearly strained the system .  Notwithstanding this massive investment, the 
Appellate Body was ultimately unable to make findings  in respect of all the claims.  This was less 
than ideal as an outcome.  The DSU highlighted the importance of the prompt settlement of disputes 
to the effective functioning of the WTO.  Where that  did not occur, or was not possible, the value of 
dispute settlement was called into question.  Memb ers needed to reflect on the systemic challenges 
this and other similarly complex cases posed.  Aust ralia thanked the Appellate  Body and the Panel for 
their work in hearing this dispute.  Australia hope d that the DSB's findings would be implemented in a 
timely manner, to finally bring this dispute to a close.  
25. The representative of the United States said that his country wished to provide clarifications 
on two issues that had been raised in previous in terventions.  First, a question had been raised 
concerning the US$18 billion figure mentioned in the first US intervention.  The EU had frequently 
argued that launch aid and other support were less th an the United States had asserted.  At the present 
meeting, the United States provided, in its statem ent, citations to the Panel and Appellate Body 
Reports so that Members could verify the accuracy  of the numbers the United States was using.  The 
United States was not aware that the EU provided similar support for any diffe rent numbers.  Second, 
with respect to the issue of export subsidies, the Appellate Body had found that the Panel had 
misunderstood the applicable test to find de facto  export contingency under Article 3.1(a) and 
footnote 4 of the SCM Agreement.  The Appellate Bo dy had reversed all of the Panel's conclusions on 
this issue, including the Panel's findings that certain  grants of launch aid were not export subsidies.   
26. Therefore, whether the instances of launch aid to Airbus were prohibited export subsidies 
remained, for the time being, an open question.  The fact of the matter was that, at the present 
meeting, the DSB would rule that EU and member  State subsidies breached their WTO obligations.  
Each grant of launch aid and the other subsidies prov ided by EU countries to Airbus over the last four 
decades had caused adverse effects to the interest of  the United States.  With respect to the argument 
that the adverse effects findings were narrowed,  the United States wished to emphasize that it 
considered those findings to be quite  broad.  For example, the Reports had found lost sales in ten sales 
campaigns between Airbus and Boeing.  Those ca mpaigns had involved the airlines:  EasyJet, 
Air Berlin, Czech Airlines, Air Asia, Iberia, Sout h African Airways, Thai Airways International, 
Singapore Airlines, Emirates Airlines and Qantas.  Fu rthermore, the Reports had found loss of market 
share in such non-minor markets as the EU, Austra lia, China and Korea.  Therefore, even without 
prohibited subsidies findings, the EU and its member States must still bring themselves into compliance with the DSB's recommendations and ru lings, once adopted.  Specifically, the EU and its 
member States would have to take appropriate step s to withdraw the subsidies or remove the adverse 
effects within six months.   WT/DSB/M/297 
Page 10  
 
  27. The representative of the European Union said that, with regard to the figure of 
US$18 billion, the United States had cited one paragr aph from the Panel Report.  The EU would read 
it again carefully but was sure that it did not mention a figure of US$18 billion.  The EU could not prove the negative.  To the extent Members had th e time and resources, they should read the Report 
and see if those fantasy figures were there.  Then  Members would see for themselves that those were 
purely fantasy figures. 
28. The DSB took note of the statements, and adopt ed the Appellate Body Report contained in 
WT/DS316/AB/R and the Panel Report contained in WT/DS316/R, as modified by the Appellate 
Body Report. 
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