EUROPEAN COMMUNITIES AND CERTAIN MEMBER STATES – MEASURES AFFECTING TRADE IN LARGE CIVIL AIRCRAFT
Document: Communication from the United States Answers to Questions from Brazil
Date: 15 May 2006
Document codes: WT/DS316/8; WT/DS316/2; WT/DS316/6.
Complainant: U.S.
Respondent: EU, France, Germany, Spain, United Kingdom
Third parties: Australia, Brazil, Canada, China, Japan, South Korea
Dispute stage: Retaliation & Arbitration
Agreements cited: Art. 3.1, 3.2, 5, 6.3  Subsidies and Countervailing Measures (SCM)Art. XVI:1  GATT 1994Art. 1, 2  Subsidies and Countervailing Measures (SCM)Art. III:4  GATT 1994

EUROPEAN COMMUNITIES AND CERTAIN MEMBER STATES –
MEASURES AFFECTING TRADE IN LARGE CIVIL AIRCRAFT

Communication from the United States

Answers to Questions from Brazil

 The following communication is circulated at the request of the delegation of the
United States.

 On 21 April 2006, the United States requested the Dispute Settlement Body ("DSB") to
decide that the panel established on 20 July 2005 (the "20 July panel") pursuant to the US request for
the establishment of a panel circulated in docume nt would also examine the complaint
contained in the request for the establishment of a panel circulated in document The
United States further requested the DSB to accept the US request for a panel, and to agree that the
panel would have the following revised terms of reference:

"To examine, in the light of the relevant provisions of the covered agreements cited
by the United States in documents and , the matter
referred to the DSB by the United States in those documents, and to make such
findings as will assist the DSB in making the recommendations or in giving the
rulings provided for in those agreements."

 The April 2006 panel request supplements and clarifies the 20 July panel request, including
by providing additional detail with respect to meas ures that were already covered by the first US
panel request in order to address certain procedural questions that the EU has raised and thereby
eliminate some of the procedural issues for the panel. Therefore, there is overlap in the vast majority
of the subject matter of the two panel requests. It would appear to raise substantial systemic and
procedural issues if these two panel proceedings were conducted separately.

 Thus, as the United States explained at the 21 April 2006 DSB meeting (see attached excerpt
from the statement at that meeting), the purpose of the US request is to facilitate the efficient
functioning of the dispute settlement system by ha ving the matters in the two requests considered by
the same panel. The most efficient way to do that would be to have the matter contained in the April
2006 request considered by the 20 July panel. Me rging the two panel proceedings in this manner
would be in keeping with past practice by the DSB.

 In response to the US request, the delegation of Brazil asked the United States to clarify the
following two issues. The United States thanks the delegation of Brazil for the opportunity to engage
in a discussion of the issues presented by the US re quest and for presenting its questions in writing.
The United States is pleased to answer Brazil's questions.

Q1: Why has the United States preferred to ask for this decision in lieu of activating the
provisions of Article 7 of the DSU, which sp ecifically address situations where a party to
the dispute wishes panel terms of references other than the standard ones?

A1: After the DSB established the 20 July panel, th e United States and the EC were not able to
agree on panelists. Therefore, after consulta tion with the Chairman of the DSB and the
Chairperson of the Committee on Subsidies a nd Countervailing Measures, the designate of
the Director-General composed the panel on 17 October 2005 (WT/DS316/4). The parties
then worked with the panel and the Secretaria t to establish the panel's working procedures,
which the panel issued on 9 November 2005. It took a substantial investment of time and
resources by the parties, the Secretariat, and the panel itself to reach this point. The panel has
taken no additional substantive decisions since that time.

In light of this history and effort invested to date in the 20 July panel, it would be inefficient
to address the situation through special terms of reference for the new panel, even if the
parties were to agree on such special terms of reference. The parties would need to repeat
these difficult procedural steps, and the DSB would need to deal with the status of the existing
20 July panel.

In light of these facts, the United States believ es the simplest and most efficient approach for
addressing the complaint contained in document WT/DS316/6 would be to revise the 20 July
panel's terms of reference as set out above. It was not clear to the United States that Article 7
of the DSU provided a means for doing so, how ever, because Article 7 provides that the
parties have only 20 days from panel establishmen t to agree on special terms of reference.
Failing that, the standard terms shall apply. Ther efore, in the interests of maximum certainty,
the United States decided instead to seek a decision of the DSB.

Q2: What could the implications of this decision be for future cases where, as in Brazil -
Aircraft (DS46) or Chile - Price Bands (DS207), changes relevant to the measure at issue
are put in place after consultations are he ld, but before the panel is established, or
where an amendment to the challenged measure is introduced while the panel is engaged
in considering the said measure? Brazil recalls that, in the two cited cases, the Appellate
Body considered that the panel had the author ity to decide on the measure in dispute
without any need of a second panel and modification of the terms of reference. If the
DSB takes the decision requested by the United States today, would Members be
compelled or stimulated to, in possible fu ture situations similar to the ones just
described by Brazil, ask the DSB to establish an additional panel and, later on, to merge
the two panels and revise their terms of reference?

A2: The United States does not believe that the pr oposed decision, if taken by the DSB, would
have the implications that Brazil mentions in this question.

The proposed decision would not alter the author ity of panels to decide on the measure in
dispute, nor would it change the options available to parties when there is disagreement on the
measure in dispute. The EC raised numerous procedural questions with respect to the first US
panel request, and while the United States consider s that it would have prevailed if the panel
had addressed those questions, we considered it preferable to simplify what is already an
extremely complex dispute by eliminating any b asis for the questions at the outset. Nothing
about our proposal would prevent a complaini ng party from choosing a different approach in
a different situation; indeed, in different situa tions it might be faster and more efficient to
litigate such procedural questions. The DSB decision would simply provide a means for

addressing the current procedural posture in the s ituation in this dispute, namely, that there
are two panel requests with respect to the same measures. As the United States noted at the
21 April 2006, DSB meeting, there is preceden t for this approach, just as there are the
precedents that Brazil cited in its question for the approach of litigating procedural issues
before a panel.

 The United States hopes that these clarifications address Brazil's concerns and will facilitate
the DSB's further consideration of the US request . The United States would be pleased to discuss
these matters further with any Member.

Excerpt of US statement on item 6(a)

at the DSB meeting held on 21 April 2006

 Mr. Chairman, this first sub-item concerns the request by the United States for a decision of
the DSB, which – as you have just mentioned – was circulated to Members in document

 Our written request sets out the reasons why th e United States is seeking this decision. Let
me take a moment to summarize what we are asking the DSB to do, and why.

 By way of background, Members will recall that on 20 July 2005, the DSB established a
panel to examine the US claims regarding the s ubsidies that France, Germany, the United Kingdom,
Spain, and the European Communities have provide d and are continuing to provide to Airbus, the
European manufacturer of large civil aircraft. That panel was composed on 17 October 2005.

 Shortly thereafter, on 26 October 2005, the EC filed a request for preliminary rulings that
raised various procedural objections with respect to the US panel request. In addition, certain member
States committed additional new subsidies to Airbus.

 Although none of the objections in the EC's preliminary ruling request had merit, the United
States indicated its willingness to hold further consu ltations with the EC in order to address those
concerns, and thereby to simplify matters for the pa nel. The United States al so wished to consult on
the new Airbus subsidies.

 Accordingly, the United States filed a further request for consultations regarding the EC and
member State measures on 31 January 2006. The Un ited States and the EC held those consultations
on 23 March 2006.

 On 10 April, the United States filed a furthe r request for the establishment of a panel,
following up on those consultations.

 In view of the relationship that I have just outlined between our 2005 panel request and the
request filed this month, the United States consider s that the efficient functioning of the dispute
settlement system would be served if the matters contained in this month's request were considered by
the panel established last July.

 The United States therefore decided to ask the DSB to take a decision to that effect, the
decision we are now discussing.

 As we noted in our request, the DSB has taken similar decisions in analogous situations. For
example, Article 9.1 of the DSU also reflects a polic y, in certain circumstances, of having a single
panel consider multiple panel request s related to the same matter whenever it is feasible to do so.
And, under Article 9.1, the DSB has in the past taken decisions to refer a subsequently submitted
complaint to a previously established panel.

 While Article 9.1 obviously does not apply to the situation before us today, the United States
believes that the DSB's experience with that article provides useful guidance. We have drawn upon
that experience in structuring our request for a DSB decision.

 We hope that the Members of the DSB will be able to agree to our request, and we thank
Members in advance for their support.

 In this connection, we also recognize th at the European Communities is facing similar
procedural issues in its dispute regarding alleged US subsidies for large civil aircraft, since the EC has
established two separate panels relating to the same matter.

 The United States believes that the decision we are seeking today in DS316 would be an
appropriate approach for addressing the procedur al issues in DS317 as well, and we would be
prepared to support such a request by the European Communities.