Measures Affecting Trade in Large Civil Aircraft
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PUBLIC VERSION EUROPEAN COMMUNITIES AND CERTAIN MEMBER STATES – MEASURES AFFECTING TRADE IN LARGE CIVIL AIRCRAFT (WT/DS316) FIRST SUBMISSION OF THE UNITED STATES OF AMERICA November 15, 2006 Table of Contents Table of Reports Cited I. INTRODUCTION .......................................................1 II. PROCEDURAL BACKGROUND ..........................................3 A. Consultation Request and Panel Establishment...........................3 B. The Annex V Process...............................................4 C. The Second U.S. Consultation and Panel Requests ........................5 1. The U.S. Second Consultation and Panel Requests and Request That the Matter in the Second Request Be Referred to the DS316 Panel ........5 2. The EC Refusal to Consent to Refer the Matter in the Second U.S. Panel Request to the DS316 Panel ....................................6 3. The EC Refusal to Allow the Annex V Record from the DS316 Dispute to Be Shared with the DS347 Panel ................................7 4. The Resumption of the DS316 Panel Process ......................7 III. FACTUAL BACKGROUND ..............................................9 A. Background on Airbus SAS ..........................................9 B. Background on the Subsidization of Airbus ............................10 C. Background on the Adverse Effects to the Interests of the United States ......18 IV. LEGAL ARGUMENT...................................................19 A. The French, German, UK, and Spanish Governments Have Provided Massive Subsidies to Airbus in the Form of Launch Aid .........................21 1. The Airbus Governments Have Supported Airbus with Launch Aid For Over 30 Years and Continue to Do So ..........................22 2. Launch Aid is a Subsidy Within the Meaning of Article 1 of the SCM Agreement................................................28 a. Launch Aid Constitutes a Financial Contribution to Airbus ....28 b. Launch Aid Confers a Benefit on Airbus ..................29 i. The development of LCA is risky and expensive ......29 ii. Repayment of Launch Aid is success-dependent ......31 iii. Launch Aid repayment is back-loaded ..............33 iv. The Airbus governments provide Launch Aid to Airbus interest-free or at below-market interest rates that do not reflect its preferential features.....................35 v. The WTO has already found that financing with terms and conditions equivalent to Airbus Launch Aid confers a benefit .......................................39 vi. The Airbus governments and Airbus concede that Launch Aid confers a benefit on Airbus....................39 vii. EC state aid decisions confirm that Launch Aid confers a benefit on Airbus...............................41 c. The Launch Aid Program Is Specific to Airbus .............42 3. Every Grant of Launch Aid That Airbus Has Received to Develop Its LCA Family Is a Specific Subsidy to Airbus Within the Meaning of Articles 1 and 2 of the SCM Agreement.........................43 a. Launch Aid for the A300 and A310 Is a Specific Subsidy .....44 i The A300/A310 Launch Aid constitutes a financial contribution ...................................44 ii. The A300 and A310 Launch Aid confers a benefit .....46 iii. The A300/A310 Launch Aid is specific .............48 b. Launch Aid for the A320 Is a Specific Subsidy .............49 i. The A320 Launch Aid constitutes a financial contribution .............................................49 ii. The A320 Launch Aid confers a benefit .............51 iii. The A320 Launch Aid is specific ..................54 c. Launch Aid for the A330 and A340 Is a Specific Subsidy .....55 i. The A330/A340 Launch Aid constitutes a financial contribution ...................................56 ii. The A330/A340 Launch Aid confers a benefit ........57 iii. The A330/A340 Launch Aid is specific .............60 d. The French Launch Aid for the A330-200 Is a Specific Subsidy ...................................................61 e. The French and Spanish Launch Aid for the A340-500 and A340- 600 Is a Specific Subsidy ...............................62 i. The French Launch Aid is a specific subsidy .........63 ii. The Spanish Launch Aid is a specific subsidy ........65 f. Launch Aid for the A380 Is a Specific Subsidy .............67 i. The French Launch Aid for the A380 is a specific subsidy .............................................68 ii. The German Launch Aid for the A380 is a specific subsidy .............................................70 iii. The Spanish Launch Aid for the A380 is a specific subsidy .............................................72 iv. The UK Launch Aid for the A380 is a specific subsidy . 73 4. In 2006, the Airbus Governments “Reaffirmed Their Agreement to Support Airbus” in the Development of New Models of LCA ........75 B. The Launch Aid that Airbus Has Received for the A380, the A340-500/600, and the A330-200 Are Prohibited Export Subsidies .........................81 1. The SCM Agreement Prohibits Subsidies That Are Contingent Upon Export Performance .........................................82 2. The UK, French, German, and Spanish Launch Aid for the A380 Is Contingent on Export Performance .............................86 a. The UK, French, German, and Spanish Governments Have “Granted” Subsidies for the A380........................86 b. The UK, French, German, and Spanish Governments Anticipated or Expected Exportation or Export Earnings ................86 c. The A380 Launch Aid Subsidies Were “Tied To” Anticipated or Expected Exportation or Export Earnings ..................91 3. The French and Spanish Launch Aid for the A340-500/600 Is Contingent on Export Performance ......................................94 a. The French and Spanish Governments Have “Granted” Subsidies for the A340-500/600 ..................................94 b. The French and Spanish Governments Anticipated or Expected Exportation or Export Earnings ..........................94 c. The A340-500/600 Launch Aid Subsidies Were “Tied To” Anticipated or Expected Exportation or Export Earnings ......96 4. The French Launch Aid for the A330-200 Is Contingent on Export Performance...............................................97 a. The French Government Has “Granted” Subsidies for the A330- 200................................................98 b. The French Government Anticipated or Expected Exportation or Export Earnings ......................................98 c. The A330-200 Launch Aid Was “Tied To” Anticipated or Expected Exportation or Export Earnings ..................99 C. The European Investment Bank Has Repeatedly Subsidized the Development of Airbus Large Civil Aircraft........................................100 1. Factual Background on the European Investment Bank ............100 2. The Loan That the EIB Provided to EADS in 2002 Is a Subsidy Under Articles 1 and 2 SCM Agreement .............................102 a. The EIB Loan Constitutes a Financial Contribution .........102 b. The EIB Loan Confers a Benefit........................102 c. The EIB Loan Is Specific Under Article 2 of the SCM Agreement ..................................................105 3. The Loans That the EIB Provided to Airbus Between 1988 and 1993 Are Specific Subsidies .........................................105 a. The 1988 – 1993 EIB Loans Constitute Financial Contributions ..................................................106 b. The 1988 – 1993 EIB Loans Confer Benefits on Airbus ......107 c. The 1988 – 1993 EIB Loans Are Specific Within the Meaning of Article 2 of the SCM Agreement........................108 D. The German, French, UK, and Spanish Governments Have Subsidized Airbus Through the Provision of Infrastructure and Infrastructure-Related Grants ...109 1. German Authorities Subsidized Airbus by Creating an Industrial Site for Airbus in Hamburg ........................................110 a. Factual Background on the Hamburg Infrastructure Subsidies ..................................................110 b. The Provision of the Hamburg Site Constitutes a Financial Contribution to Airbus................................113 c. The Provision of the Hamburg Site Confers a Benefit on Airbus ..................................................113 i. The Hamburg Government created a site that the commercial market would not have created .........114 ii. The Hamburg Government is providing the site to Airbus for less than adequate remuneration ...............115 d. The Hamburg Infrastructure Subsidies Are Specific Within the Meaning of Article 2 of the SCM Agreement..............117 e. The EC’s Refusal to Provide Requested Information Gives Rise to Inferences..........................................117 2. German Authorities Subsidized Airbus by Helping Pay the Costs of Constructing the A380 Assembly Line in Hamburg ...............118 3. German Authorities Subsidized Airbus by Spending at Least DM 50 Million to Lengthen the Runway at Bremen Airport for the Company’s Exclusive Use ............................................119 a. The Provision of the Runway Constitutes a Financial Contribution to Airbus ..........................................119 b. The Provision of the Runway Confers a Benefit on Airbus . 119 c. The Provision of the Runway is Specific to Airbus..........120 d. The EC’s Refusal to Provide Requested Information Gives Rise to Inferences..........................................120 4. French Authorities Subsidized Airbus by Creating the AéroConstellation Industrial Site in Toulouse for the A380 ........................121 a. Factual Background on the AéroConstellation