Bridges Weekly Trade News Digest • Volume 9 • Number 19 • 1st June 2005

Dispute Settlement Update: Airbus, Sugar And Gambling


The Office of the United States Trade Representative (USTR) announced 30 May that it would file a request for the establishment of a WTO panel to hear its challenge against EU subsidies for ‘large civil aircraft’ manufacturer Airbus the following day. The EU responded by saying that it too would renew its WTO challenge against US aircraft manufacturer Boeing. In October 2004, both Members had requested formal WTO consultations on aircraft subsidies on behalf of their respective aircraft makers, but had subsequently agreed to discuss the bilaterally outside the WTO. The breakdown of the much-publicised bilateral consultations set the stage for what would be one of the most commercially significant WTO disputes in the history of the institution.

The US alleges that the launch aid for Airbus as well as other government support to the company qualify as illegal subsidies under the WTO Agreement on Subsidies and Countervailing Measures. The recent decision to actually launch litigation in the WTO came in the wake of recent preparations by EU member states to commit USD 1.7 billion in what the USTR called "new risk-free launch aid subsidies" for Airbus.

The EU argues that the launch aid that the US is criticising does not constitute a subsidy, since EU governments have earned commercial rates of return on its loans to Airbus. Its counter-motion targets US tax incentives to Boeing as well as what it alleges to be some USD 23 billion in subsidies to the company since 1992 in the form of research and development programmes funded by the US defence and space programmes. The US has described these figures as inflated.

Trade experts have expressed concern about the impact of this case on the ongoing Doha negotiations. Some fear that it could heighten tensions in the already sensitive talks — a concern that has been down played by both the EU and US. On this matter, EU Trade Commissioner Peter Mandelson noted "everything that is wrapped up in the Doha Round is infinitely more important than what is basically a grudge fight between the two companies." He also suggested that even a clear decision against one or both sides would not be feasible to enforce, since neither side would benefit from trade retaliation on such an enormous scale.

DSB adopts Sugar rulings, US reports on implementation of Gambling findings

In other dispute settlement news, on 19 May, WTO Members sitting as the Dispute Settlement Body (DSB) adopted the Appellate Body and Panel reports on Australia, Thailand and Brazil’s challenge against the EU’s sugar regime (see BRIDGES Weekly, 4 May 2005). The three co-complainants in this dispute welcomed the findings of the Appellate Body and the Panel.

Brazil added that nothing in the reports compelled the EU to change its preferential access for sugar from African, Caribbean and Pacific (ACP) countries. The EU noted its intention to comply with both reports. However, it expressed concern about a number of systemic issues raised by the report such as the legal effect of a footnote which, it had argued at the panel level, excluded 1.6 million tonnes of sugar from the scope of its subsidies reduction requirements — an amount equivalent to the EU’s sugar imports from the ACP and India. Speaking on behalf of the ACP countries, some of who were third parties in this dispute, Mauritius expressed concerns about the socio-economic impact of the findings on the weak and vulnerable ACP States. According to Mauritius, some ACP states such as St Kitts and Nevis were already being forced out of sugar production.

At the same meeting, the US announced its intention to implement the recent panel ruling in the gambling dispute involving Antigua and Barbuda. However, it noted that it would need a reasonable period of time within which to do so (see BRIDGES Weekly, 13 April 2005). Antigua asked the US to be more precise about its implementation plans. Antigua commented that implementation would require not only a clarification of US internet gambling restrictions but also market access for Antigua for the provision of gambling and betting services.

Further background on the Airbus dispute, including the USTR press release is available at: http://www.ustr.gov/Document_Library/Press_Releases/2005/May/United_States_Takes_Next_Step_in_Airbus_WTO_Litigation.html

Further information on the 19 May DSB meeting is available at: http://www.wto.org/english/news_e/news05_e/dsb_19may05_e.htm

ICTSD reporting; "Growing disputes hit global trading," FINANCIAL TIMES, 1 June 2005; "War of aircraft titans gives WTO biggest case yet," FINANCIAL TIMES, 1 June 2005.