UNITED
STATES – MEASURES AFFECTING TRADE IN LARGE CIVIL AIRCRAFT (SECOND COMPLAINT)
RECOURSE TO ARTICLE 22.6 OF THE DSU BY THE UNITED
STATES
Decision by the arbitrator
BCI
deleted, as indicated [[***]]
TABLE OF
CONTENTS
1 Introduction.. 11
1.1
Original proceedings and compliance proceedings. 11
1.2
Referral to arbitration and arbitration proceeding. 16
2 Procedural matters. 19
2.1
Treatment of BCI and HSBI 19
2.2
Public presentation of the parties' opening statements. 20
2.3
The United States' allegations regarding the European Union's use of
certain US HSBI submitted in the DS316 arbitration proceeding. 20
2.4
Impact of the Covid-19 pandemic on the work of the Arbitrator 21
2.5
The United States' request for leave to file an additional submission
regarding the
purported elimination of the Washington State B&O tax rate reduction as of
1 April 2020. 22
3 Mandate of the Arbitrator. 23
4 Burden of Proof. 24
5 The DS316 proceedings and the DS316
Arbitrator's valuation of
adverse effects. 25
5.1
The DS316 original proceedings. 26
5.2
The DS316 compliance proceedings. 27
5.3
The DS316 arbitration proceeding. 31
6 The United States' objections to
the level of countermeasures. 33
6.1
Overview of the European Union's methodology. 33
6.2
The United States' response. 36
6.3
Order of analysis. 37
6.4
Assessment of the European Union's methodology. 38
6.4.1
Valuation of the 2004-2006 R&D Adverse Effects as part of the "adverse
effects
determined to exist" within the scope of this proceeding. 38
6.4.1.1
Whether "the adverse effects determined to exist" must be those
caused in the post-implementation period by a
subsidy with respect to which an original respondent has failed to comply with
previously issued DSB recommendations and rulings. 42
6.4.1.2
Whether the 2004-2006 R&D Adverse Effects fall within the scope of
"the adverse
effects determined to exist" under the terms of Article 7.10. 46
6.4.1.3
Conclusion. 49
6.4.2
Structure of the countermeasures in respect of the post-implementation
Washington
State B&O Tax Rate Reduction Adverse Effects. 49
6.4.3
The reference period for the post-implementation Washington State B&O Tax
Rate Reduction Adverse Effects. 50
6.4.4
Consideration of events occurring after the reference period. 52
6.4.5
Conceptual issues regarding the valuations of significant lost sales and threat
of
impedance. 53
6.4.5.1
Annualization. 53
6.4.5.2
Lost sales. 54
6.4.5.3
Threat of impedance. 55
6.4.5.3.1
Primary EU methodology based on the value of the underlying lost sales. 55
6.4.5.3.2
Alternative EU methodologies based on the value of deliveries. 58
6.4.5.3.3
Arbitrator's proposed "delivery-centric" approach. 60
6.4.5.3.3.1
Nature of "threat" 64
6.4.5.3.3.2
Findings in the compliance proceedings. 67
6.4.5.3.4
Conclusions. 74
6.4.6
Technical issues common to the valuation of both forms of adverse effects. 75
6.4.6.1
The probability that Airbus would have won each of the five sales campaigns in
the counterfactual 75
6.4.6.2
Valuation of options. 80
6.4.6.3
The number of firm orders in the counterfactual and the timing of the
deliveries. 85
6.4.6.4
Adjustments for actual cancellations and potential future cancellations. 91
6.4.6.5
Exclusion of [[***]] from counterfactual delivery prices. 96
6.4.6.6
Remaining issues regarding counterfactual delivery prices. 99
6.4.6.7
Summary of conclusions on technical issues common to the valuations of both
forms
of adverse effects. 101
6.4.7 Technical issues regarding the valuation of
significant lost sales. 102
6.4.7.1
Temporal adjustment of delivery prices to the time of the lost sales. 102
6.4.7.2
Expressing the lost sales' values on a common monetary basis. 105
6.4.7.3
Annualization period. 108
6.4.8
Technical issues regarding the valuation of threat of impedance. 108
6.4.8.1
Temporal adjustment of delivery-date values. 108
6.4.8.2
Annualization period(s) 110
6.4.9
Summary of technical valuations of the adverse effects determined to exist 114
6.4.9.1
Valuation of significant lost sales. 114
6.4.9.2
Valuation of threat of impedance. 116
6.4.9.3
Aggregated annualized value of significant lost sales and of the threat of
impedance
in the two geographic markets. 117
6.5
Countermeasures commensurate with the annualized value of the adverse effects
determined to exist 118
6.5.1
Adjustment of the annualized value of adverse effects determined to exist for
inflation
to April 2020 dollars and for future years in which countermeasures are applied. 118
6.5.2
The "commensurate" 2015 Annualized Value. 119
7 The United States' claim concerning
the principles and procedures
set out in Article 22.3 of the DSU (cross-retaliation). 120
8 Conclusion.. 121