UNITED STATES – MEASURES AFFECTING TRADE IN LARGE CIVIL AIRCRAFT (SECOND COMPLAINT)
Document: Recourse to Article 22.2 of the DSU, and Articles 4.10 and 7.9 of the SCM Agreement, by the European Union
Date: 2 October 2012
Document codes: WT/DS353/17
Complainant: EU
Respondent: U.S.
Third parties: Australia, Brazil, Canada, China, Japan, South Korea
Dispute stage: Implementation & Compliance
Agreements cited: Art. 3.1, 3.2, 5, 6.3, 1.1, 2  Subsidies and Countervailing Measures (SCM)Art. III:4  GATT 1994

UNITED STATES – MEASURES AFFECTING TRADE
IN LARGE CIVIL AIRCRAFT
(SECOND COMPLAINT)

Recourse to Article 22.2 of the DSU,
and Articles 4.10 and 7.9 of the SCM Agreement,
by the European Union

 The following communication, dated 27 Sept ember 2012, from the delegation of the
European Union to the Chairperson of the Dis pute Settlement Body, is circulated pursuant to
Article 22.2 of the DSU, and Articles 4.10 and 7.9 of the SCM Agreement.

Request by the European Union pursuant to Article 22.2 of the DSU
and Articles 4.10 and 7.9 of the SCM Agreement for authorization from the DSB
to take countermeasures against the United States in an annual amount of USD 12 billion

The Panel Report in United States – Measures Affecti ng Trade in Large Civil Aircraft
(Second Complaint) concluded that the United States provid es subsidies to Boeing that are prohibited
by the Agreement on Subsidies and Countervailing Measures ( SCM Agreement ) and/or that cause
adverse effects and serious prejudice to the interest s of the European Union. The Panel recalled that
prior recommendations of the Dispute Settlement Body (DSB) with respect to this matter continue to
be operative, and recommended that the United Stat es take appropriate steps to remove the adverse
effects or withdraw the subsidies.
1

The Appellate Body confirmed that the United St ates provides subsidies inconsistent with its
obligations under the SCM Agreement, and recommended that the United States take appropriate steps
to remove the adverse effects or withdraw the subsidies.2

At its meeting on 23 March 2012, the DSB a dopted the Appellate Body Report and the Panel
Report, as modified by the Appellate Body Report.3

Article 22 of the Understanding on Rules and Procedures Governing the Settlement of
Disputes (DSU) provides that, in the event of a failure to comply with recommendations and rulings

1 Panel Report, United States – Measures Affecting Trade in Large Civil Aircraft (Second Complaint ),
particularly Section VIII.
2 Appellate Body Report, , particularly Section XI.
3 WT/DS/353/13, 26 March 2012, , Appellate Body Report and Panel Report, Action by the Dispute Settlement Body.

of the DSB within the specified period, the comp laining Member may request authorization from the
DSB to suspend the application to the Member c oncerned of concessions or other obligations under
the covered agreements, and the DSB shall, upon request, grant such authorization.

Articles 4.7 and 4.10 of the SCM Agreement require prohibited subsidies to be withdrawn
without delay, failing which the DSB shall, upon request, grant authorization to the complaining
Member to take appropriate countermeasures.

Articles 7.8 and 7.9 of the SCM Agreement require a Member granting or maintaining a
subsidy that has resulted in adverse effects to take appropriate steps to remove the adverse effects or
withdraw the subsidy within six months, failing wh ich, in the absence of agreement on compensation,
the DSB shall grant authorization to the complaining Member to take countermeasures, commensurate
with the degree and nature of the adverse effects determined to exist.

By communication dated 24 April 2012, the Unite d States and the European Union informed
the DSB of the "Agreed Procedures under Articles 21 and 22 of the Dispute Settlement Understanding
and Article 7 of the SCM Agreement" between the European Union and the United States with respect
to the dispute
(the Sequencing Agreement).
4 Paragraph 6 of the Sequencing Agre ement provides that the European
Union may request the DSB to authorize counterme asures if it considers th at the United States has
failed to comply with the DSB recommendations and rulings within the six-month period provided for
in Article 7.9 of the SCM Agreement.

The six-month period provided for in Article 7.9 of the SCM Agreement expired on Monday
24 September 2012.

By communication dated 23 September 2012 the United States notified the European Union
that the United States has taken a number of actions allegedly withdrawing the subsidies or removing
their adverse effects, and thus complied with the recommendations and rulings of the DSB. The
European Union considers that the United States c ontinues to grant or maintain prohibited subsidies
and that it has not taken appropriate steps to rem ove the adverse effects of the subsidies or to
withdraw the subsidies, and that it has therefore failed to comply with the DSB recommendations and
rulings within the six-month period provided for in Article 7.9 of the SCM Agreement.

There is no agreement on compensation.

Accordingly, pursuant to Article 22.2 of the DSU and Articles 4.10 and 7.9 of the
SCM Agreement, the European Union requests the DSB to gr ant authorization to the European Union
to take countermeasures that are appropriate, and commensurate with the degree and nature of the
adverse effects determined to exist, respectively. Based on currently available data, countermeasures
consistent with these standards total approximately USD 12 billion
5 annually. The European Union
may update this amount annually using the most recently available data.

In considering this request for authorization to take countermeasures, the European Union has
followed the principles and procedures set forth in Article 22.3 of the DSU. Accordingly, the
European Union intends, in the first instance, to take countermeasures in the goods sector, under the

4 WT/DS353/14, 27 April 2012, , Understanding between the European Union and the United States Regarding Procedures
under Articles 21 and 22 of the DSU, concluded on 12 January 2012.
5 Equivalent to approximately EUR 9.35 billion at current exchange rates. As a matter of commercial
practice, sales of large civil aircraft are generally ne gotiated in USD, and, accordi ngly, the European Union's
request for authorization to take countermeasures is, as stated above, denominated in USD.

covered agreements listed below. However, consistent with Article 22.3(c) of the DSU, the European
Union considers that: (i) it is not practicable or effective to take counterme asures in the goods sector
up to the full amount stated above; and, (ii) the circumstances are serious enough, given, inter alia,
the degree and nature of the adverse effects and serious prejudice.

Accordingly, the European Union's countermeasures would consist of one or more of the
following:

(1) suspension of tariff concessions a nd other related obligations under the General
Agreement on Tariffs and Trade 1994 on a list of US products to be established in
due course;
(2) suspension of concessions a nd other obligations under the SCM Agreement; and,
(3) under the General Agreement on Trade in Services , suspension of horizontal or
sectoral commitments contained in the consolidated EU Schedule of Specific
Commitments, as supplemented to incorpor ate the individual Schedules of Specific
Commitments of its Member States, with re gard to all principal sectors identified in
the Services Sectoral Classification List.
In accordance with Article 22.6 of the DSU and paragraph 7 of the Sequencing Agreement, if
the United States objects to the level of suspension proposed and/or claims that the principles and
procedures set forth in Article 22.3 of the DSU have not been followed, the matter shall be referred to
arbitration. Such arbitration shall be carried out by the original panel, if members are available.