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WTO Appellate Body Confirms U.S. Win in Airbus Case: $18 Billion in Illegal European Subsidies to Airbus

Washington, D.C. – Today United States Trade Representative Ron Kirk welcomed confirmation by the Appellate Body of the World Trade Organization (WTO) that decades of subsidies provided by certain European Union (EU) member states to Airbus, totaling $18 billion, are inconsistent with WTO rules. Specifically, the WTO Appellate Body affirmed the Panel’s original findings last year that every instance of launch aid provided for new Airbus aircraft during the last forty years, as well as other subsidies the United States had challenged, caused adverse effects to the interests of the United States and therefore are WTO-inconsistent subsidies.

“The WTO Appellate Body has confirmed without a doubt that Airbus received massive subsidies for more than 40 years and that these subsidies have greatly harmed the United States, including causing Boeing to lose sales and market share in key markets throughout the world. Today’s landmark ruling will significantly benefit the U.S. aerospace industry and American aerospace workers, simply by affirming that there must be fairness and accountability in the global race for aerospace business,” said Ambassador Kirk. “President Obama and I insist that our partners live up to their commitments in the rules-based global trading system – so this Administration will always act to protect the rights of American manufacturers, and our farmers, ranchers, services providers, and workers.”

The Appellate Body confirmed the WTO Panel’s findings that European government launch aid had been used to support the creation of every model of large civil aircraft produced by Airbus. The Appellate Body also confirmed that launch aid and the other challenged subsidies to Airbus have significantly distorted the global market for large civil aircraft, and that those subsidies have directly resulted in Boeing losing sales and market share.

“This decision confirms what we have said all along, that none of the launch aid provided to Airbus is consistent with Europe’s WTO obligations,” said Kirk. “While it revised the underlying findings for the United States from $20 billion to $18 billion, the message in the Appellate Body report is clear – launch aid is illegal and the European Union and the member states should refrain from future launch aid disbursements.”

BACKGROUND

The United States initiated this WTO dispute in October 2004 to end decades of launch aid and other subsidies provided to Airbus. A panel was established to examine the matter in May 2005. The Panel issued its report in June 30, 2010, finding that European government launch aid had been used to support the creation of every model of large civil aircraft produced by Airbus. The Panel also found that launch aid and the other challenged subsidies to Airbus have significantly distorted the global market for large civil aircraft, and that those subsidies have directly resulted in Boeing losing sales and market share.

The European Union commenced the appeal on July 21, 2010 and the Appellate Body issued its report on May 18, 2011.

The Appellate Body affirmed the WTO Panel’s central findings that European government launch aid had been used to support the creation of every model of large civil aircraft produced by Airbus. The Appellate Body also confirmed that launch aid and other challenged subsidies to Airbus have directly resulted in Boeing losing sales involving purchases of Airbus aircraft by easyJet, Air Berlin, Czech Airlines, Air Asia, Iberia, South African Airways, Thai Airways International, Singapore Airlines, Emirates Airlines, and Qantas – and lost market share, with Airbus gaining market share in the European Union and in third country markets, including China and Korea at the expense of Boeing. The Appellate Body also found that the Panel applied the wrong standard for evaluating whether subsidies are export subsidies, and that the Panel record did not have enough information to allow application of the correct standard.

Following adoption by the WTO Appellate Body within 30 days, the WTO will recommend that the EU and the member states that back Airbus take appropriate steps to remove the adverse effects or withdraw the subsidies. WTO rules contemplate such action being taken within six months.

In either case, should the European Union and the relevant member states fail to comply with these recommendations by the deadline, the United States could seek the right to impose countermeasures. If the European Union and the member states assert compliance, but the United States disagrees, the United States could seek to have any disagreement referred back to the Panel.