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A $7.5 Billion Ammunition from the WTO?

Cho_Sungjoon thumbBy Sungjoon Cho [originally posted on the International Economic Law and Policy Blog on October 2, 2019]

At long last, the Article 22.6 Report (PDF) of the Arbitrator on the Boeing-Airbus dispute is out.  Note that this dispute concerns an original dispute in which the United States (on behalf of Boeing) sued the European Union for the latter’s subsidies on Airbus. Another report in a parallel case in which the EU (on behalf of Airbus) sued the United States for the latter’s subsidies on Boeing will be released in the near future.

This report reads like an accounting paper full of numbers and formulas. Obviously, the Arbitrator took great pains in computing the reasonable volume of Boeing’s lost sales (counterfactual deliveries).  Note that Boeing and Airbus constitute a near duopoly in the global market when it comes to a large civilian aircraft, which is the subject of this dispute. The Arbitrator held that:

6.458. In the light of the foregoing, we consider that the United States’ assumption that Boeing would have replaced all of the A380 Impedance Deliveries with deliveries of an equal number of 747-8I aircraft within the 2011-2013 Reference Period is reasonable in the light of the adopted findings of this dispute, and the evidence and arguments offered by the parties. (…)

Then, the Arbitrator determined that:

9.1  (…) [T]he level of countermeasures “commensurate with the degree and nature of the adverse effects determined to exist” during the 2011-2013 Reference Period amounts to USD 7,496.623 million per annum.”

While there can be a number of issues, legal and political, around this decision, let me offer three observations of my own. First, whether or how much would the U.S. government eventually utilize this ammunition bestowed by the WTO?  U.S. tariffs hurt its own economy, and others’. Also, according to Bloomberg Law, Airbus buys about 40% of parts and components from the U.S. companies. Of course, the EU may also retaliate based on a future parallel WTO decision against the U.S.

Second, if the U.S. does retaliate, this will be “legal” under the WTO system. Then, how about the current trade war against China? Will the WTO’s approval of the U.S. retaliation on the EU change the U.S. attitude toward the WTO? Or, will the U.S. government still try to have both ways, i.e., retaliation within and outside of the WTO?

Finally, would it be desirable for this kind of case to be adjudicated in the WTO? The late Robert Hudec might have thought that it is a “wrong case” for the WTO.

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