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1 [1] (January 27, 2020)

handle is hein.crs/govcaea0001 and id is 1 raw text is: FF.ri E.$~ & Updated January 27, 2020 Boeing-Airbus Subsidy Dispute: Recent Developments On October 18, 2019, the United States imposed additional tariffs on $7.5 billion worth of U.S. imports from the European Union (EU). The action, authorized by World Trade Organization (WTO) dispute settlement procedures, followed an investigation by the U.S. Trade Representative (USTR), under Section 301 of the Trade Act of 1974. The USTR determined that the EU had denied U.S. rights under WTO agreements. Specifically, the USTR concluded that the EU and certain member states had not complied with a WTO Dispute Settlement Body (DSB) ruling recommending the withdrawal of WTO-inconsistent subsidies on the manufacture of large civil aircraft. In 2011, the DSB confirmed that these subsidies breached the EU's WTO obligations under the 1994 General Agreement on Tariffs and Trade (GATT) and the Agreement on Subsidies and Countervailing Measures (SCM Agreement). The authorization to take countermeasures against the EU-the largest amount in the WTO's history comes after nearly 15 years of litigation at the WTO. The litigation involves the world's two largest aerospace manufacturers, U.S.-based Boeing and EU-based Airbus, which have competed for years for dominance in the commercial airline supply market. The United States successfully argued that Airbus had received billions of dollars in illegal subsidies, which resulted in a loss to Boeing of significant market share throughout the world. The U.S. action to impose tariffs, consistent with the WTO arbitrator's finding on the appropriate level of countermeasures, aims to pressure the EU into either ending the subsidies or negotiating an agreement with the United States. In a pending parallel dispute case against the United States, the WTO is expected to authorize the EU to seek remedies in the form of tariffs on U.S. exports to the EU, after the WTO determined earlier this year that the United States had also failed to abide by WTO subsidies rules in supporting Boeing. Due to the magnitude of U.S.-EU trade (of which civilian aircraft, engines, and parts are a major component) and ongoing trade frictions, some Members of Congress are closely monitoring developments in the WTO litigation and in U.S.-EU negotiations. The United States and the EU have long claimed that the other either directly or indirectly subsidizes their domestic civil aircraft industry. According to the United States, the EU and the governments of certain EU member states France, Germany, Spain, and the United Kingdom (UK) have provided, over the years, subsidies to their respective Airbus-affiliated companies to aid in the development, production, and marketing of large commercial aircraft (e.g., through equity infusions, debt forgiveness, debt rollovers, marketing assistance, and alleged political and economic pressure on purchasing governments). The EU, on the other hand, claims that Boeing benefits from U.S. government support, mainly in the form of research and development funds from the National Aeronautics and Space Administration (NASA), the U.S. Department of Defense, and other agencies. Furthermore, the EU claims that Boeing receives subsidies in the form of tax reductions and exemptions, as well as infrastructure support to develop and produce new aircraft. During the 1970s and 1980s, the United States and the EU engaged in bilateral and multilateral negotiations to address their concerns. While these efforts ultimately failed, they led to two major agreements still in place today: the 1979 GATT Agreement on Trade and Civil Aircraft and the 1986 Civil Aircraft Sector Understanding (an annex to the Organisation for Economic Co-operation and Development's Arrangement on Officially Supported Export Credits). The United States also initiated dispute settlement cases under the GATT's 1980 SCM Agreement. The United States and the EU subsequently reached a bilateral agreement in 1992: the U.S.-EU Agreement on Large Civil Aircraft (LCA Agreement). The agreement placed limits on government subsidies affecting large civil aircraft manufactured by Airbus and Boeing, and it included a ban on future production support, a cap on development support, a ceiling on indirect support, and conditions on repayment terms. Citing dissatisfaction with EU compliance with the 1992 Agreement and failure to negotiate a more comprehensive deal on subsidies, the United States resorted to WTO dispute settlement in 2004. It filed a case with the WTO (WTO case DS316) and withdrew from the LCA Agreement. In response, the EU immediately announced the initiation of a WTO dispute settlement case against the United States (WTO case DS353) and rejected the U.S. termination of the 1992 Agreement. After intense discussions in late 2004 and early 2005, both sides reached an agreement on the terms of a new bilateral deal. They also agreed not to request WTO panels relating to the pending disputes and not to commit new government support for aircraft development or production during negotiations for the new deal. However, negotiations ultimately stalled and both sides requested the establishment of WTO panels in May 2005. After multiple phases of proceedings since the WTO first ruled in favor of the United States in 2010 (see text box), on October 2, 2019, the WTO issued its final ruling on the U.S. case against the EU, pursuant to Article 22 of the Dispute Settlement Understanding. Key Developments in the U.S. Case since 2010 June 2010. The WTO dispute settlement panel ruled in favor of the United States. It determined that some of the subsidies provided by the EU and certain member states for the manufacture of lar1ge civil aircraft violated the EU's WTO commitments and had caused harm to the interests of the United States. The EU appealed the panel's findings before the WTO Appellate Body (AB). K~:> gognpo goo g , q 'S a X 11LULANJILiN,