DS316: European Communities and Certain Member States — measures affecting trade in large civil aircraft

The US stated that on 1 June 2011, the DSB adopted its recommendations and rulings in this dispute. The DSB recommended that the member granting each subsidy found to have resulted in adverse effects bring the subsidy into compliance with its obligations under the Subsidies and Countervailing Measures (SCM) Agreement. Under Article 7.9 of the SCM Agreement, the EU and certain member states had six months to withdraw the subsidies or take appropriate steps to remove the adverse effects of the subsidies, according to the US.

That six-month period ended on 1 December 2011. The EU and the four member states at issue had not removed the adverse effects or withdrawn the subsidies within that period, said the US.

In the absence of any agreement on compensation, the US said that it had requested authorization to take countermeasures at an annual level commensurate with the degree and nature of the adverse effects determined to exist, pursuant to Article 7.9 of the SCM Agreement and Article 22.2 of the Dispute Settlement Understanding (DSU). According to the US, this amount corresponded to the annual value of lost sales of exports of US large civil aircraft displaced from the EU market and of exports of US large civil aircraft displaced from third-country markets.

The US said that it took this step in light of Article 22.6 of the DSU, which provides for the negative consensus rule to apply within 30 days of the end of the period for compliance. According to the US, if the EU did not object to the US request, the DSB would approve the US request for authorization today unless the DSB decided by consensus to reject the request. If the EU objected, the matter would automatically be referred to arbitration.

The US stated that, on 9 December 2011, in order to facilitate a resolution of this dispute, the US also requested consultations with the EU and the member states at issue with regard to this matter (WT/DS316/19). The US said that the EU had accepted its request, and that  consultations were scheduled for early January 2012.

The US also noted that it was currently working with the EU on a sequencing agreement for procedures under Articles 21 and 22 of the DSU for the purposes of this dispute, and stated that any such agreement would be notified to the DSB.

The EU said that it had noted that the US had said that the EU had failed to comply with the DSB recommendations and rulings in this dispute, and that it had requested authorization from the DSB to suspend the application of concessions or other obligations under the WTO covered agreements to the EU pursuant to Article 7.9 of the SCM Agreement and Article 22.2 of the DSU.

The EU said that it formally objected to the US proposal. In particular, the EU objected to the level of suspension of concessions or other obligations contained in the US request, and claimed that the principles and procedures set forth in Article 22.3 of the DSU had not been followed and that the proposal was not allowed under the covered agreements. The EU requested the matter to be referred to arbitration pursuant to Article 22.6 of the DSU, recalling that, according to this provision, concessions or other obligations would not be suspended during the course of the arbitration.

The EU also stated that the EU and the US were informally discussing the issue of sequencing, and that the EU expected an agreement to be concluded shortly.

The US responded by saying that it had taken note of the EU’s objection in its statement pursuant to DSU Article 22.6, and pointed out the different views of the parties on this issue. In the US view, under the terms of the DSU, the EU’s objection automatically resulted in the matter being referred to arbitration.

According to the US, Article 22.6 did not refer to any decision by the DSB in this regard. Thus, there was no need today for the DSB to take any further action or decision for this matter to be referred to arbitration.

The US said that, nevertheless, it had no objection if the DSB wished to take note of the fact that this issue had been raised and to  confirm that it may not consider the US request for authorization, since the matter was being referred to arbitration.

The US noted that it would have been preferable had the EU objection been filed before this meeting. The US would then have been willing to withdraw its request in light of the referral of the matter to arbitration, and this meeting would have been cancelled. According to the US, this was the procedure that was followed by Japan and the US in the US — Zeroing (DS322) dispute.

The US said that, in light of the EU’s objection today, the US  recognized that the DSB could not take action on the US request for authorization to take countermeasures.

The EU replied by stating that members would be aware that the EU and the US disagreed on the interpretation of Article 22.6 of the DSU. The EU said that it considered that this was a matter for the DSB.

The DSB took note of the statements, and it was agreed that the matter raised by the EU in its statement was referred to arbitration, as required by Article 22.6 of the DSU.

  

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Next meeting 

The next regular meeting of the DSB is scheduled for 20 January 2012.