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Statement of USTR General Counsel Tim Reif at USTR Press Conference About WTO Panel Rulings Regarding Airbus

"Good morning. Thank you all for being here today. I am very pleased to announce, on behalf of United States Trade Representative Ron Kirk, that the United States has achieved a landmark victory in the WTO dispute brought against the European Union, France, Germany, Spain, and the United Kingdom, to redress decades of market distorting launch aid and other subsidies provided to Airbus. In accordance with WTO rules, the United States will be seeking adoption of the report at the earliest opportunity. The WTO Panel confirmed that European government subsidies have been used to support the creation of every model of large civil aircraft produced by Airbus, that those subsidies have significantly distorted the global market for large civil aircraft, and that those subsidies have caused adverse effects to the United States, including lost sales and market share to Boeing.

"After decades of competing against a consistently subsidized Airbus, American aerospace workers, the Boeing Company and its suppliers throughout the United States, today have finally been awarded a long overdue victory in the form of this very strong, very thorough, and very clear panel report from the WTO. And what the Panel said in no uncertain terms cannot be overstated: there is not a single instance of launch aid provided in the last forty years, across all models of Airbus aircraft that was provided on anything close to commercial terms. Indeed, given the report’s confirmation that Europe has never provided launch aid on commercial terms and in a manner consistent with its WTO obligations, we would expect the governments that have backed Airbus to refrain from future launch aid disbursements.

"As the Panel recognized, 'launch aid' is a form of subsidy that is particularly trade-distorting in the large civil aircraft market. To launch a new model of large commercial aircraft, a producer must invest billions of dollars before the first aircraft is delivered and the first revenue is received. The launch aid to Airbus takes the form of loans provided by those governments to cover some or all of the launch investment costs, to be repaid by Airbus through royalties on its aircraft sales. If Airbus does not sell enough aircraft to repay the loan, the balance is forgiven. The Panel found that the launch aid for each and every model of Airbus aircraft was provided for a below-market interest rate, and therefore constituted a subsidy.

"The Panel also found that the launch aid and other subsidies we challenged caused adverse effects to the interests of the United States and therefore are inconsistent with WTO rules. In addition, the Panel concluded that certain launch aid provided for the A380 superjumbo was prohibited outright under WTO rules, without a showing of adverse effects. The Panel said that these prohibited subsidies should be withdrawn within a period of 90 days.

"The Panel confirmed that launch aid and other subsidies significantly distorted the launch decisions Airbus made, and found that but for the subsidies, none of the Airbus aircraft models would have been launched when they were, and certainly not with the same features. The Panel’s words could not be clearer on this point:

'In our view, it is simply not feasible that, without LA/MSF {Launch Aid / Member State Financing} and the other subsidies, relying entirely on non-subsidized financing, Airbus could have undertaken the pace of aircraft development that would have enabled it to launch the range of LCA {large civil aircraft} that it has successfully launched to date, which has resulted in its present position in the market for LCA {large civil aircraft}.' (Paragraph 7.1985)

"In closing, I would take this opportunity to reiterate this Administration’s intention to make sure that our trading partners play by the rules of the game. President Obama and Ambassador Kirk are committed to enforcing our trade agreements, including, where necessary, through dispute settlement consistent with the rules-based global trading system at the World Trade Organization. Protecting the rights of American manufacturers, farmers, ranchers, services providers, and workers under our trade agreements is and will remain a priority of this Administration. At this time, I will open the floor for questions."