The World Trade Organization’s (“WTO”) Dispute Settlement Body (“DSB”) last month accepted a U.S. request to establish a compliance panel in the case European Communities — Measures Affecting Trade in Large Civil Aircraft, WT/DS316. The U.S. requested that the WTO consider whether the European Union (“E.U.”) has complied with an earlier finding that the European aircraft consortium Airbus has received illegal government subsidies that caused adverse effects—in the form of displacement of exports and lost sales—for U.S. aircraft maker Boeing.

In a May 2011 ruling in this dispute, the WTO Appellate Body found that the governments of France, Germany, Spain, and the United Kingdom provided illegal subsidies to Airbus in the form of launch-aid loans, infrastructure support, and equity infusions. The United States has stated that these illegal subsidies to Airbus totaled $18 billion, although the E.U. has argued that the total is significantly lower. The E.U. was given six months—until December 1, 2011—either to withdraw these subsidies or remove the adverse effects of the subsidies. The E.U. informed the DSB in December 2011 that it had brought its measures into compliance with the Appellate Body’s ruling by taking actions including securing repayment of certain loans and terminating certain launch-aid loan agreements.

The United States disagreed, insisting that the E.U. had provided no evidence to support its claimed compliance. The United States asserted that the E.U. had failed to remove the subsidies in question, and had even granted new subsidies to Airbus. As a result, the United States requested the establishment of a compliance panel. U.S. Trade Representative Ron Kirk stated that the “United States cannot accept anything less than an end to this subsidized financing,” and that “[t]he United States remains prepared to engage in any meaningful efforts that will lead to the goal of ending subsidized financing at the earliest possible date.” The United States told the DSB that the E.U.’s notification to the WTO regarding compliance “shows that it has not changed its behavior in any meaningful way.”

The Office of the U.S. Trade Representative on April 19 published a notice requesting comments on this compliance dispute (77 Fed. Reg. 23539). Any comments should be submitted by May 21 in order to ensure consideration.
The E.U. and the United States have negotiated a procedural agreement under which the two sides agreed to work together to ensure that the compliance panel can issue its ruling within 90 days. If the U.S. prevails in the compliance dispute, a WTO arbitration proceeding would then determine the permissible level of U.S. countermeasures.

The procedural agreement between the two sides also applies to a separate WTO dispute in which the Appellate Body in March concluded that Boeing had received illegal subsidies of between $3.2 and $4.3 billion. The United States is required to comply with this ruling by September 2012.