US wins $7.5 bn sanctions against EU in WTO fight

THE ARBITRATION PANEL RULED THAT THE US IS ENTITLED TO SLAP RETALIATORY DUTIES ON EU GOODS AS BRUSSELS FAILED TO COMPLY WITH WTO’S RULING

The US Wednesday secured permission from a World Trade Organization (WTO) arbitration panel to impose retaliatory measures worth about $7.5 billion annually on goods and services exported by the European Union to the US.

The arbitration panel of Faizullah Khilji, Scott Gallacher and Thinus Jacobs ruled that the US is entitled to slap retaliatory duties on EU goods and services as Brussels failed to comply with WTO’s ruling on the various government subsidies provided by the EU governments to Airbus.

The panel said $7.5 billion is commensurate with the adverse effects suffered by Airbus’ US rival Boeing in terms of lost sales and impeded deliveries of its aircraft because of launch aid/member state financing (LA/MSF) for large civil aircraft granted by France, Germany, Spain and the UK.

It, however, disagreed with the US demand for imposing $10.56 billion annually in countermeasures. Surprisingly, the EU did not indicate any lower figure. Brussels repeatedly urged the arbitrators to defer the ruling until the second compliance panel issued its report on the failure of the US to implement the WTO ruling on US federal and state subsidies to Boeing. However, the arbitrators turned down the EU’s demand to delay the ruling saying it was neither legally necessary nor legally appropriate to await the outcome of the second compliance proceeding concerning the failure of the US to implement the WTO ruling against Boeing.

The panel ruled that in the light of its mandate set out in Article 7.10 of the WTO’s Agreement on Subsidies and Countervailing Measures, it determined the maximum level of countermeasures based on the value of the adverse effects during the December 20112013 reference period. The arbitrator chose not to quantify any adverse effects that may have arisen after that.

The adverse effects were determined in relation to five sales campaigns that Airbus won during the December 2011-2013 reference period and that Boeing would have won in the absence of LA/MSF subsidies, as found in the first compliance panel proceedings. These sales campaigns resulted in orders for 104 Airbus aircraft in the twin-aisle and Very Large Aircraft product market. Since 2004, the US and the EU are locked in a tit-for-tat trade dispute over the subsidies provided to Airbus and Boeing respectively. After the EU’s Airbus captured a significant share of the world market for civil aircraft in early 2000, the US launched a massive trade dispute against Airbus. EU trade commissioner Cecilia Malmstrom said while the EU takes note of the decision of the WTO’s arbitration panel in the Airbus case and the level of possible countermeasures, it would be imprudent to apply countermeasures at this juncture. “Both the EU and the US have been found at fault by the WTO dispute settlement system for continuing to provide certain unlawful subsidies to their aircraft manufacturers,” she said.