Article 21.5 DSU Appellate Body Report United States - Measures Affecting Trade in Large Civil Aircraft (Second Complaint) : spillovers from Defense R&D add to the tug-of-war between panels and the WTO Appellate Body

The March 2019 release of the Appellate Body's compliance report in United States - Measures Affecting Trade in Large Civil Aircraft (Second Complaint) marks yet another chapter in the ongoing Boeing-Airbus dispute. While raising numerous new and old subsidy issues, this paper focuses on one specific aspect, the evaluation of the financial contributions and benefits associated with the Department of Defense (DOD) R&D procurement contracts. The paper describes the differing views taken by the panels compared to the Appellate Body. It highlights two issues that led to an extremely lengthy proceeding: (1) the black or white nature of the decision regarding the characterization of contracts which have features of both purchases of services and joint ventures; and (2) the difficulty in demonstrating a financial contribution flowing from payments for R&D for military systems to Boeing's civil aircraft production. It concludes that this case represents a failure of the WTO dispute settlement system and underscores flaws in the ASCM in that after fifteen years of litigation, no determination was made as to whether or not the DOD R&D contracts examined here constituted impermissible subsidies.