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TWN Info Service on WTO and Trade Issues (Apr19/03)
3 April 2019
Third World Network


AB upholds ruling on US government support for Boeing

Published in SUNS #8878 dated 1 April 2019

Geneva, 29 Mar (Kanaga Raja) – The Appellate Body (AB) of the World Trade Organisation (WTO) has upheld a compliance panel ruling that the United States provided subsidies to its aircraft manufacturer Boeing in the form of tax breaks from Washington State which resulted in lost sales of A320neo and A320ceo single-aisle aircraft from Airbus in five sales campaigns.

Amongst other findings, the AB upheld the compliance panel’s finding that a business and occupancy (B&O) tax rate reduction enacted in the US State of Washington for the production of Boeing aircraft caused significant lost sales, and a threat of impedance of sales to the US and United Arab Emirates (UAE) markets, for Airbus in the single-aisle large civil aircraft (LCA) market in relation to five price-sensitive campaigns between 2007 and 2015.

In a somewhat mixed ruling, the AB reversed several findings of the compliance panel in respect of other US government support programs but found that there are insufficient factual findings by the compliance panel or undisputed facts on the panel record for the AB to complete the legal analysis in this respect.

In its overall conclusion, the AB recommended that the DSB request the US to bring its measures found to be inconsistent with the Subsidies and Countervailing Measures (SCM) Agreement, into conformity with its obligations under that Agreement.

Both the US and the EU claimed victory in the dispute.

In a press release, the EU welcomed the ruling by the AB, saying that it vindicates the EU’s long-held position that the United States has taken no steps to comply with WTO rules on support to Boeing.

The ruling concludes definitively that the US has continued to subsidise the company illegally despite previous rulings condemning this behaviour. This has caused significant harm to its European competitor Airbus, said the EU.

“Today’s ruling by the WTO’s Appellate Body confirms the European Union’s position that the United States has failed to remove the massive and trade-distorting subsidies it is granting to Boeing. The WTO sided with the EU in its argument that several US measures, notably the Washington State tax programme and business incentives from South Carolina are in fact subsidies. The Appellate Body dismissed all of the US appeal points,” the EU maintained.

A separate press release from the Office of the US Trade Representative (USTR), claiming “a major win” for the US, said that in 2017, a WTO compliance panel rejected EU arguments that 29 state and federal programs allegedly conferred $10.4 billion in subsidies to Boeing over six years. The panel found only one program, a Washington state tax measure worth an average annual value of approximately $100 million from 2013-2015, to be WTO-inconsistent.

“The EU filed an appeal arguing that the panel should have found against the United States on more of the EU claims. The compliance appellate report today confirms that the only WTO-inconsistent program is that Washington state tax measure,” said the USTR press release.

BACKGROUND

According to the Appellate Body report, the European Union and the United States each appealed certain issues of law and legal interpretations developed in the Panel Report, United States – Measures Affecting Trade in Large Civil Aircraft (Second Complaint) – Recourse to Article 21.5 of the DSU by the European Union.

The Panel was established on 23 October 2012 pursuant to Article 21.5 of the Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU) to consider a complaint by the European Union regarding the alleged failure on the part of the United States to implement the recommendations and rulings of the Dispute Settlement Body (DSB) in the original proceedings in US – Large Civil Aircraft (2nd complaint).

In the original proceedings in this dispute, the European Communities claimed that the United States had provided subsidies to US producers of large civil aircraft (LCA), namely, The Boeing Company (Boeing), and that such subsidies are prohibited and/or actionable under the Agreement on Subsidies and Countervailing Measures (SCM Agreement).

The original panel, established on 17 February 2006, found that certain tax exemptions and tax exclusions provided to Boeing under the foreign sales corporation (FSC) legislation and the FSC Repeal and Extraterritorial Income Exclusion Act of 2000 (ETI Act), including the transition and grandfather provisions of the ETI Act and the American Jobs Creation Act of 2004 (AJCA) , were prohibited export subsidies under Articles 3.1(a) and 3.2 of the SCM Agreement. This finding was not appealed.

In addition, the original panel found that certain specific subsidies caused serious prejudice to the interests of the European Communities within the meaning of Articles 5(c) and 6.3(b)-(c) of the SCM Agreement. Specifically, the original panel found that:

a. payments provided to Boeing by the National Aeronautics and Space Administration (NASA) pursuant to procurement contracts entered into under eight aeronautics research and development (R&D) programmes and access to facilities, equipment, and employees, as well as payments and access to facilities provided to Boeing by the United States Department of Defense (USDOD) pursuant to assistance instruments entered into under the 23 research, development, test, and evaluation (RDT&E) programmes, through their effects on Boeing’s development of technologies in relation to the 787, caused significant price suppression, significant lost sales, and a threat of displacement and impedance of exports from third country markets, with respect to the 200-30 0 seat wide-body LCA product market;

b. the FSC/ETI subsidies and the business and occupation (B&O) tax rate reduction provided by the State of Washington under House Bill (HB) 2294, through their effects on Boeing’s pricing behaviour with respect to the 737 NG, caused significant price suppression, significant lost sales, and displacement and impedance of exports from third country markets, with respect to the 100-20 0 seat single-aisle LCA market; and

c. the FSC/ETI subsidies and the B&O tax rate reduction provided by the State of Washington under HB 2294 and by the City of Everett, through their effects on Boeing’s pricing behaviour with respect to the 777 and 787, caused significant price suppression, significant lost sales, and displacement and impedance of exports from third country markets, with respect to the 300-400 seat wide-body LCA product market.

On appeal, the Appellate Body upheld the original panel’s finding that the aeronautics R&D subsidies caused serious prejudice to the interests of the European Communities with respect to the 200-300 seat LCA market, within the meaning of Articles 5(c) and 6.3(b)-(c) of the SCM Agreement, except that it reversed the original panel’s finding to the extent that it related to a threat of displacement and impedance of exports in the third country markets in Ethiopia, Iceland, and Kenya (but not Australia), within the meaning of Article 6.3(b) of the SCM Agreement.

In addition, the Appellate Body reversed the original panel’s finding that the FSC/ETI subsidies and the B&O tax rate reduction caused serious prejudice to the interests of the European Communities within the meaning of Articles 5(c) and 6.3(b)-(c) of the SCM Agreement in the 100-200 and 300-400 seat LCA markets. The Appellate Body completed the legal analysis and found that, with respect to two sales campaigns involving 100-200 seat LCA, the FSC/ETI subsidies and the Washington State B&O tax rate reduction caused, through their effects on Boeing’s prices for the 737NG, significant lost sales within the meaning of Article 6.3(c).

The Appellate Body also reversed the original panel’s finding that the European Communities had failed to show that the remaining subsidies had affected Boeing’s prices in a manner giving rise to serious prejudice with respect to the 100-200 seat and 300-400 seat LCA markets. The Appellate Body completed the legal analysis and found that the effects of the property and sales tax abatements related to the industrial revenue bonds (IRBs) issued by the City of Wichit a complemented and supplemented the price effects of the FSC/ETI subsidies and the Washington State B&O tax rate reduction, thereby causing serious prejudice, in the form of significant lost sales, within the meaning of Articles 5(c) and 6.3(c), in the 100-200 seat LCA market.

Subsequent to the adoption of the original panel report and the Appellate Body report, the United States provided a notification to the DSB on 23 September 2012, identifying “a number of actions to withdraw the subsidies found to have caused adverse effects or to remove their adverse effects”, in light of which the United States considered that it “ha[d] fully complied with the recommendations and rulings of the Dispute Settlement Body in this dispute”.

On 25 September 2012, the European Union requested consultations with the United States, explaining that the “actions and events listed by the United States in its 23 September 2012 notification do not withdraw the subsidies or remove their adverse effects, as required by Articles 4.7 and 7.8 of the SCM Agreement”, and that “the United States has failed to achieve compliance with the recommendations and rulings of the DSB.”

The European Union and the United States held consultations on 10 October 2012, but the consultations failed to resolve the dispute. At its meeting on 23 October 2012, the DSB referred this dispute to the original panel, if possible, in accordance with Article 21.5 of the DSU (compliance proceedings).

The Panel circulated its Report to Members of the World Trade Organization (WTO) on 9 June 2017.

OVERALL FINDINGS AND CONCLUSIONS

On the issue of terms of reference, the AB said the question of whether a claim falls within the scope of Article 21.5 proceedings is to be decided based on whether the claim has been resolved on the merits in the original proceedings and was thus covered by the recommendations and rulings of the DSB. A party’s “fault” for the non-resolution of a claim, or the lack of such fault, is not determinative of whether a claim can be reasserted in compliance proceedings.

Accordingly, the AB found that the Panel did not err in admitting the European Union’s claims relating to the pre-2007 USDOD procurement contracts in these compliance proceedings.

a. The AB therefore upheld the Panel’s finding, in paragraphs 7.131 and 11. 5.a.ii of the Panel Report, that the European Union’s claims relating to the pre-2007 USDOD procurement contracts were within its terms of reference.

On USDOD procurement contracts, the AB found that the Panel acted inconsistently with Article 11 of the DSU in its financial contribution analysis under Article 1.1(a)(1) of the SCM Agreement by not engaging sufficiently with the European Union’s evidence and arguments, and by failing to provide reasoned and adequate explanations for its findings. Furthermore, the AB found that the Panel’s benefit analysis suffers from the same shortcomings.

a. The AB therefore reversed the Panel’s finding, in paragraphs 8.437.b and 11.7.c.i of the Panel Report, that, assuming arguendo the payments and access to USDOD facilities, equipment, and employees provided to Boeing through the pre-2007 and post-2006 USDOD procurement contracts were to involve financial contributions, the European Union has not established that they confer a benefit on Boeing within the meaning of Article 1.1(b) of the SCM Agreement. The AB also found that there are insufficient factual findings by the Panel or undisputed facts on the Panel record for the AB to complete the legal analysis in this respect.

On FSC/ETI (Foreign Sales Corporation/Extraterritorial Income) tax concessions, the AB said for revenue to be considered “foregone” under Article 1.1(a)(1) (ii) of the SCM Agreement, a government must relinquish an entitlement to raise revenue. Accordingly, establishing that such a financial contribution exists requires a determination that a government has relinquished an entitlement to raise revenue. This determination must focus on the conduct of a government, rather than on the use of tax concessions by the eligible taxpayers. The AB found that the Panel erred by focusing instead on whether Boeing used FSC/ETI tax concessions.

a. The AB therefore reversed the Panel’s finding, in paragraphs 8.612 and 1 1.7.c.ii of the Panel Report, that the European Union had not established that, after the expiry of the implementation period, the United States grants or maintains subsidies to Boeing in the form of FSC/ETI tax concessions because the European Union had failed to demonstrate that those tax concessions involved a financial contribution within the meaning of Article 1.1(a)(1)(ii) of the SCM Agreement.

b. Furthermore, the AB said that it has completed the legal analysis and found that, to the extent that Boeing remains entitled to FSC/ETI tax concessions in the post-implementation period, the United States has not ceased to provide a financial contribution and thus has not withdrawn FSC/ETI subsidies with respect to Boeing within the meaning of Article 7.8 of the SCM Agreement.

On the issue of the City of Wichita industrial revenue bonds (IRBs), the AB said the length of time during which the subsidy programme has been in operation must be taken into account by panels in their assessment of specificity under Article 2.1(c) of the SCM Agreement.

However, it does not follow from this that the entire period during which the programme has been in operation has necessarily to be chosen as the relevant time period in determining whether, under the second sentence of this provision, disproportionately large amounts of subsidy have been granted to certain enterprises.

Accordingly, the AB found that the Panel did not err in its interpretation of Article 2.1(c) of the SCM Agreement in concluding that, in the specific circumstances of this case, the relevant time period over which to consider disproportionality was as from the end of the implementation period. With respect to the Panel’s application of Article 2.1(c) of the SCM Agreement, the AB found that the Panel erred in finding that no disparity existed between the expected and actual distribution of the subsidy.

a. The AB therefore reversed the Panel’s finding, in paragraphs 8.640 and 11.7.c.iii of the Panel Report, that the European Union has failed to establish that the tax abatements provided through IRBs issued by the City of Wichita involve specific subsidies within the meaning of Articles 1 and 2 of the SCM Agreement. The AB also found that there are insufficient factual findings by the Panel or undisputed facts on the Panel record for the AB to complete the legal analysis in this respect. Having reversed the Panel’s finding, the AB did not consider it necessary to address whether, in addition, the Panel acted inconsistently with Article 11 of the DSU.

With regard to the European Union’s claim that the Panel erred in its interpretation of the term “limited number” in the second sentence of Article 2.1(c) of the SCM Agreement, the AB observed that what constitutes a quantitatively limited group of enterprises must be determined on a case-by -case basis, taking into account the particular characteristics of the subsidy programme and the circumstances of the case. The AB disagreed with the European Union that the Panel implicitly interpreted the term “limited number” as “one” or “fewer than three”. Rather, the Panel considered that the European Union had not met its burden of proof as to whether the EDB (economic development bond) subsidy has been used by only a “limited number” of certain enterprises.

Accordingly, the AB found that the Panel did not err in its interpretation of the term “limited number” of certain enterprises in Article 2.1(c) of the SCM Agreement.

With regard to the European Union’s claim that the Panel erred in its interpretation and application of the term “certain enterprises” in the second sentence of Article 2.1(c), the AB observed that the determination of whether a number of enterprises or industries constitute “certain enterprises” should be made in light of all relevant characteristics of the entities, including the nature and purpose of their activities in the markets in question and the context in which these activities are exercised. The Panel erred by taking into account three specific entities in its analysis under Article 2.1(c) without having established that they constitute “certain enterprises”. However, the Panel’s rejection of the European Union’s claims does not hinge on its statement relating to the relevance of the three specific entities in its analysis of de facto specificity.

With regard to the European Union’s claim that the Panel erred in its interpretation of the term “predominant use” in the second sentence of Article 2.1(c), the AB observed that this term refers primarily to the incidence or frequency with which the subsidy is used by certain enterprises. Furthermor e, the AB found that evidence demonstrating the existence of “predominant use by certain enterprises” may also be pertinent for demonstrating the granting of “disproportionately large amounts of subsidy to certain enterprises”. Accordingly, the AB found that, by excluding a category of evidence potentially relevant to the assessment of the existence of “predominant use by certain enterprises” and ultimately for determining de facto specificity, on the basis that this evidence was more relevant to the assessment of another factor under Article 2.1(c), second sentence, the Panel erred in its interpretation of these factors in Article 2.1(c).

a. The AB therefore reversed the Panel’s finding, in paragraph 8.843 of the Panel Report, that the European Union has failed to establish that the subsidy provided by South Carolina through EDB (economic development bond) proceeds is specific within the meaning of Article 2.1 of the SCM Agreement. The AB also found that there are insufficient factual findings by the Panel or undisputed facts on the Panel record for the AB to complete the legal analysis in this respect. Having reversed the Panel’s finding, the AB did not consider it necessary to address whether, in addition, the Panel acted inconsistently with Article 11 of the DSU.

On the issue of South Carolina MCIP (multi-county industrial park) job tax credits, the AB said a subsidy is specific under Article 2.2 of the SCM Agreement when access to it is either explicitly or implicitly limited to entities engaged in economic activities in the market that have their headquarters, branch offices, or manufacturing facilities in a “designated geographical region” within the jurisdiction of the granting authority, or that are otherwise established within such a region. In the present case, such limitation contained in Section 12-6-33 60 of the South Carolina Income Tax Act is not made void by the fact that enterprises not currently located in an MCIP may become part of an MCIP in the future and then qualify for the subsidy. The AB found that the Panel erred in the application of Article 2.2 of the SCM Agreement in stating that the availability of the MCIP subsidy only to enterprises located within an MCIP “cannot be meaningfully considered to amount to a limitation under Article 2.2” of the SCM Agreement.

a. The AB therefore reversed the Panel’s finding, in paragraphs 8.931 and 11.7.c.vii of the Panel Report, that the European Union has failed to establish that the subsidy provided through the additional corporate income tax credits is specific within the meaning of Article 2.2 of the SCM Agreement.

b. Furthermore, the AB said it completed the legal analysis and found that the subsidy provided to Boeing through the additional corporate income tax credits, pursuant to Section 12-6-3360 of the South Carolina Income Tax Act, is specific within the meaning of Article 2.2 of the SCM Agreement.

On the issue of continuing adverse effects, the AB said in assessing whether appropriate steps have been taken to remove the adverse effects of a subsidy within the meaning of Article 7.8 of the SCM Agreement, the time period for assessing the removal of adverse effects may include developments subsequent to the time of order, including through the point of delivery. Accordingly, the AB found that the Panel erred in its interpretation of Article 7.8 by excluding ab initio, from an inquiry into whether the United States had failed to take appropriate steps to remove the adverse effects of the subsidies, evidence relating to transactions for which the orders arose in the original reference period but for which deliveries remain outstanding in the post-implementation period.

a. The AB therefore reversed the Panel’s interpretation of Article 7.8 of the SCM Agreement, in paragraphs 9.311 to 9.314 of the Panel Report, and its statement in paragraph 9.332 of the Panel Report, that reliance on the role of deliveries of aircraft in the post-implementation period as evidence of a continuation of serious prejudice would be inconsistent with Article 7.8. Having reversed this finding, the AB did not address whether, in addition, the Panel erred in the application of Article 7.8, or acted inconsistently with Article 11 of the DSU. However, because it is not clear whether the Panel’s decision to exclude two additional sales campaigns as significant lost sales resulted from the above error, and because the European Union’s request is based on a premise that the AB rejected, it declined to reverse the Panel’s finding, in paragraph 9.407 of the Panel Report, insofar as it excludes the Fly Dubai 2008 and Delta Airlines 2011 sales campaigns.

b. The AB further found that the Panel did not err under Articles 5 and 6.3 of the SCM Agreement, or act inconsistently with Article 11 of the DSU, in separately finding that the European Union’s arguments are unsupported by the evidence and/or in contradiction with the findings made in the original proceedings. The AB therefore upheld the Panel’s finding, in paragraphs 9.332 and 11.8.b of the Panel Report, that the European Union had failed to establish that the original adverse effects of the pre-2007 aeronautics R&D subsidies continue into the post-implementation period as present serious prejudice in relation to the A330 and A350XWB, within the meaning of Articles 5(c) and 6.3 of the SCM Agreement.

On the issue of technology effects, the AB considered that the Panel was required to assess whether the acceleration effects of the pre-2007 aeronautics R&D subsidies had an impact, not only on the timing of the launch of the 787, but also on the timing of its first delivery. The AB said it is not persuaded that it was sufficient for the Panel to base its conclusion regarding the European Union’s technology effects claims solely on its understanding of the original panel’s findings.

“Given that the counterfactual inquiry in these compliance proceedings was different from the one at issue in the original proceedings, we would have expected an analysis from the Panel as to why a focus on post-launch acceleration effects was not warranted,” it said.

By failing to assess in its counterfactual analysis whether the acceleration effects of the pre-2007 aeronautics R&D subsidies had an impact, not just on the launch of the 787, but also on the timing of first delivery of the 787, the Panel did not properly assess the counterfactual question as to whether there remain acceleration effects of the pre-2007 aeronautics R&D subsidies in the post-implementation period. Accordingly, the AB found that the Panel erred in the application of Articles 5 and 6.3 and, as a consequence, Article 7.8 of the SCM Agreement.

a. The AB therefore reversed the Panel’s findings, in paragraphs 9.177, 9.1 86, and 9.355 of the Panel Report, that the European Union failed to demonstrate: (i) that the acceleration effects of the pre-2007 aeronautics R&D subsidies in relation to Boeing’s technology development for the 787 have continued into the post-implementation period; (ii) the existence of original subsidy technology effects of the pre-2007 aeronautics R&D subsidies in relation to Boeing’s technology development for the 787 in the post-implementation period; and (iii) the existence of spill-over technology effects of the pre-2007 aeronautics R&D subsidies on the 787-9/10, the 777X, and the 737 MAX in the post-implementation period.

b. As a consequence, and to that extent, the AB also reversed the Panel’s findings, in paragraphs 9.219-9.220, 9.372-9.373, 11.8.a, and 11.8.e of the Panel Report, with respect to the European Union’s failure to establish that the pre-2007 aeronautics R&D subsidies are a genuine and substantial cause of any of the forms of serious prejudice alleged with respect to the A350XWB and the A320neo in the post-implementation period, through a technology causal mechanism. Having reversed these findings, the AB did not address the European Union’s additional claims as to whether the Panel erred in the application of Articles 5, 6.3, and 7.8 of the SCM Agreement or acted inconsistently with Article 11 of the DSU.

c. The AB further found that it is unable to complete the legal analysis with regard to whether there remain acceleration effects of the pre-2007 aeronautics R&D subsidies in the post-implementation period.

On the issue of price effects, the AB said the Panel did not consider that, in order to find significant lost sales through a price causal mechanism, there must be no non-price factors that potentially contributed to Boeing having won those sales. Rather, the Panel’s understanding of the legal standard properly reflected a weighing and balancing of price and non-price factors to reach a conclusion as to whether a sales campaign was particularly price-sensitive, such that the tied tax subsidies could be found to be a genuine and substantial cause of serious prejudice. Accordingly, the AB found that the Panel did not err in the interpretation of Articles 5, 6.3, and, as a consequence, Article 7.8 of the SCM Agreement, when identifying the applicable causation standard.

As regards the Panel’s assessment of the relative significance of the amount of the tied tax subsidies, the AB considered that there was a basis for the Panel to assume that Boeing had been able to use the benefits of the subsidies arising from all its LCA sales to lower the prices in particularly price-sensitive sales campaigns in the single-aisle LCA market. In addition, the Panel was not required to establish that the per-aircraft amount of the subsidies available for these sales campaigns exceeds the differentials in the net prices of Airbus’ and Boeing’s competing aircraft for purposes of finding that the subsidies are a genuine and substantial cause of Airbus’ loss of these sales, and, consequently, serious prejudice. The AB thus found that the Panel did not err under Articles 5 and 6.3 of the SCM Agreement, or acted inconsistently with Article 11 of the DSU, in its assessment of the relative significance of the amount of the tied tax subsidies.

a. The AB therefore upheld the Panel’s finding, in paragraph 9.252 of the Panel Report, and as a consequence to the extent that this is reflected in paragraph 11.8.a, that the European Union had failed to establish that the tied tax subsidies cause serious prejudice, within the meaning of Articles 5(c) and 6.3 of the SCM Agreement, in the twin-aisle LCA market in the post-implementation period.

b. The AB also upheld the Panel’s findings, in paragraphs 9.407, 9.444, and 11.8.c-d of the Panel Report, that the European Union had established that the tied tax subsidies cause significant lost sales, within the meaning of Articles 5(c) and 6.3(c) of the SCM Agreement, in the single-aisle LCA market, with respect to the Fly Dubai 2014, Iceland air 2013, and Air Canada 2013 sales campaigns, in the post-implementation period, as well as a threat of impedance of imports of Airbus single-aisle LCA to the United States and exports of Airbus single-aisle LCA to the United Arab Emirates, within the meaning of Articles 5(c) and 6.3(a)-(b) of the SCM Agreement, in the post-implementation period.

By rejecting that untied subsidies may be found to have a genuine link to the production of relevant LCA as was accepted by the Appellate Body in the original proceedings, the Panel failed to apply the correct legal standard for assessing whether the untied subsidies are a genuine cause of adverse effects under Articles 5 and 6.3 of the SCM Agreement.

“In particular, we do not consider that the legal standard for causation re quires a showing that the untied subsidies actually altered Boeing’s pricing of its LCA. Accordingly, we find that the Panel erred under Articles 5 and 6.3 of the SCM Agreement by requiring that the European Union demonstrate that the untied subsidies actually led to price reductions of Boeing LCA sales in order to establish that the subsidies caused adverse effects through the lowering of Boeing LCA prices,” said the AB.

a. The AB therefore reversed the Panel’s findings, in paragraphs 9.277, 9.2 91, 9.472, and 9.476 of the Panel Report, and as a consequence to the extent that this is reflected in paragraphs 11.8.a and 11.8.e of the Panel Report, that the European Union had failed to establish that the untied subsidies cause serious prejudice, within the meaning of Articles 5(c) and 6.3 of the SCM Agreement, in the post-implementation period through a price causal mechanism. Having reversed this finding, the AB did not address whether, in addition, the Panel acted inconsistently with Article 11 of the DSU.

b. The AB further found that it is unable to complete the legal analysis with regard to whether the untied subsidies cause adverse effects within the meaning of Articles 5 and 6.3 of the SCM Agreement.

On the issue of additional claims on appeal, the AB noted that the European Union claims that the Panel erred in the interpretation of Articles 5, 6.3, and 7.8 of the SCM Agreement in finding that a subsidized product can only cause serious prejudice to another product if the two products in question compete in the same market, insofar as that interpretation relates to serious prejudice in the form of significant price suppression, significant price depression, and significant lost sales. The European Union states that, in requesting reversal of this finding, it seeks to enable the AB, in completing the legal analysis, to find significant lost sales in instances where the 787-8/9 and the A350XWB-900 competed for the sale.

“In light of our disposition of other claims on appeal, and, in particular, the fact that we are not called upon to consider the European Union’s request for completion of the legal analysis regarding the twin-aisle LCA market, we need not consider any potential competitive relationship between the 787-8/9 and the A350XWB-900 LCA and, therefore, do not address the European Union’s claim of error,” said the AB.

The AB noted that the European Union also claims that the Panel erred in the interpretation of Articles 5, 6.3, and 7.8 of the SCM Agreement in purportedly finding that aggregation and cumulation of subsidies are the only two approaches to the collective assessment of the adverse effects of multiple subsidies. The European Union states that it seeks reversal of the Panel’s interpretation since it would be critical for the Appellate Body’s completion of the legal analysis.

“In these proceedings, we were unable to conclude that the untied subsidies were a genuine cause of adverse effects, and such a showing would also have been required under the European Union’s proposed approaches to the collective assessment of multiple subsidies. Therefore, in light of our disposition of other claims on appeal, we are not called upon to consider any such additional methods for the collective assessment of subsidies and, therefore, do not address the European Union’s claim of error,” said the AB.

The AB noted that the United States has presented four conditional claims challenging various findings of the Panel.

“In light of our disposition of other claims on appeal, the conditions for these claims have not been triggered. We therefore do not address the United States’ conditional claims of error,” said the AB.

 


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