INTERNATIONAL TRADE LAW

LEARNING OBJECTIVES

At the end of the discussion the student should be able to;

 Explain the role of international organizations such as the World Trade Organization
(WTO) and their agreements (e.g., GATT) in regulating and facilitating global trade.
 Analyze the dispute resolution process of the WTO’s Dispute Settlement Body (DSB)
and its significance in maintaining fair trade relations between member nations.
 Understand the provisions of the TRIPS Agreement and assess its impact on
international trade, especially in terms of protecting intellectual property across
borders.
 Evaluate a significant trade dispute to understand the causes of trade conflicts and the
mechanisms used to resolve them.

TABLE OF CONTENTS

 Introduction to International Trade Law

 Legal Framework of International
 Trade Dispute Resolution Mechanisms
 Intellectual Property Rights in Trade
 Case Studies: Trade Disputes

International Trade Law- is the body of legal rules, regulations, and agreements that govern
the exchange of goods, services, and capital across international borders. It plays a crucial
role in facilitating global trade by establishing a common framework for how countries
engage in trade, resolve disputes, and ensure compliance with international obligations. The
scope of international trade law encompasses various aspects such as trade agreements, tariff
and non-tariff barriers, dispute resolution mechanisms, intellectual property rights, and
customs regulations.

Overview of International Trade Law:

1. Sources of International Trade Law: International trade law is primarily derived

from three main sources:

Multilateral Agreements: The most significant source is the World Trade

Organization (WTO), which provides a multilateral framework for trade in goods,
services, and intellectual property. The WTO’s key agreements include:

 General Agreement on Tariffs and Trade (GATT): Governs trade in goods

and aims to reduce tariffs and other trade barriers.
 General Agreement on Trade in Services (GATS): Focuses on opening up
the services markets.
 Agreement on Trade-Related Aspects of Intellectual Property Rights
(TRIPS): Deals with intellectual property protections.
 Bilateral and Regional Trade Agreements: In addition to multilateral agreements,
countries enter into bilateral or regional trade agreements (RTAs) to facilitate trade
between specific countries or regions. Examples include the North American Free
Trade Agreement (NAFTA, now replaced by the USMCA) and the European Union
(EU) customs union.

Domestic Trade Legislation: Countries implement domestic laws and policies in

compliance with their international obligations. These laws govern export and import
controls, trade remedies (such as anti-dumping duties), and customs regulations.

2. Objectives of International Trade Law: The primary goals of international trade

law include:
 Promoting Free Trade: By reducing or eliminating tariffs, quotas, and other
barriers, international trade law encourages free movement of goods and
services.
 Ensuring Fair Competition: Trade rules aim to prevent unfair practices, such
as dumping (selling below cost to undermine competition) and subsidies that
distort the market.
 Resolving Trade Disputes: A key aspect of international trade law is the
resolution of disputes between countries through mechanisms like the WTO’s
Dispute Settlement Body (DSB). This ensures that countries comply with their
obligations and resolve conflicts through legal means rather than economic
retaliation.
 Fostering Economic Development: By encouraging trade liberalization,
international trade law helps developing countries integrate into the global
economy, boosting growth and development.
3. Key Principles of International Trade Law:
 Most-Favored-Nation (MFN) Principle: Under this rule, countries cannot
discriminate between their trading partners and must grant them the same
trading advantages. For instance, if a country lowers tariffs for one country, it
must extend the same tariff rate to all other WTO members.
 National Treatment Principle: Countries must treat foreign goods, services,
and intellectual property no less favorably than they treat their own, once they
have entered the domestic market.
 Trade Liberalization: Progressive reduction of trade barriers, including
tariffs, quotas, and subsidies, in order to promote free and fair competition
globally.
4. Dispute Resolution in International Trade: The WTO’s Dispute Settlement
Mechanism is the most widely used forum for resolving trade disputes between
countries. This system ensures that disputes are handled transparently and in
compliance with international law. Countries can bring complaints against others, and
if found in violation, the defendant country must either bring its policies into
conformity with WTO agreements or face sanctions.
5. Challenges and Criticisms: International trade law has faced criticisms, especially
from developing countries, which argue that the benefits of trade liberalization are
unevenly distributed. Concerns have also been raised about the environmental and
social impacts of global trade, as well as the imbalance of power between developed
and developing nations in negotiating trade agreements.
International trade law is a crucial framework that supports the smooth functioning of global
trade by promoting fair practices, resolving disputes, and fostering cooperation among
nations. As globalization continues to advance, international trade law plays an increasingly
vital role in ensuring that trade contributes to global economic stability and development.

Legal Framework of International Trade

The Legal Framework of International Trade consists of a system of rules, agreements,

and institutions that regulate the exchange of goods, services, and intellectual property across
borders. It provides the legal foundation to ensure that international trade operates smoothly,
predictably, and fairly. This framework is a combination of multilateral, regional, bilateral,
and national legal instruments that work together to govern global trade relations.

1. Multilateral Agreements

The backbone of the international trade legal framework is multilateral agreements,

primarily administered by the World Trade Organization (WTO), which was established in
1995. The WTO provides a comprehensive set of agreements that serve as the foundation of
international trade law, covering trade in goods, services, and intellectual property rights.

 General Agreement on Tariffs and Trade (GATT): Initially created in 1947 and
later incorporated into the WTO framework, GATT governs international trade in
goods by reducing tariffs, quotas, and other trade barriers. It promotes trade
liberalization, encourages fair competition, and seeks to prevent discriminatory trade
practices.
 General Agreement on Trade in Services (GATS): This agreement extends the
WTO’s reach into trade in services, ensuring that countries open their services sectors
to foreign providers on a reciprocal basis while maintaining transparency and fairness
in their regulations.
 Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS):
TRIPS provides a framework for the protection and enforcement of intellectual
property rights on a global scale. It sets minimum standards for various forms of
intellectual property (patents, trademarks, copyrights) that WTO members must
comply with.

The WTO’s legal framework also includes provisions on trade remedies (anti-dumping,
countervailing duties, safeguards) and the Dispute Settlement Understanding (DSU), which is
the cornerstone of the WTO’s dispute resolution system.

2. Regional Trade Agreements (RTAs)

In addition to multilateral agreements, international trade is also governed by regional trade

agreements (RTAs), which are legally binding arrangements between a group of countries
within a geographic region to facilitate trade by reducing or eliminating tariffs and other
barriers. RTAs include free trade agreements (FTAs), customs unions, and common markets.
Key examples include:

 North American Free Trade Agreement (NAFTA)/United States-Mexico-Canada

Agreement (USMCA): NAFTA (1994), now replaced by USMCA (2020), created a
 trilateral trade bloc in North America. These agreements eliminated tariffs and set
rules for trade and investment between the three countries.
 European Union (EU) Single Market: The EU Single Market is a highly integrated
trade area that allows the free movement of goods, services, people, and capital
between EU member states. It goes beyond a customs union by creating common
policies on trade and competition.
 Association of Southeast Asian Nations (ASEAN) Free Trade Area: ASEAN aims
to promote free trade between Southeast Asian countries through reduced tariffs and
trade facilitation.

3. Bilateral Trade Agreements

Bilateral trade agreements are treaties between two countries that facilitate trade by
reducing tariffs and addressing specific trade issues. These agreements are legally binding on
the countries involved and often focus on sectors where the two countries have
complementary interests. Examples include the U.S.-China Phase One Trade Agreement
(2020) and the Australia-China Free Trade Agreement (ChAFTA).

4. Customs and Tariff Regulations

Customs and tariff regulations are national-level legal instruments that govern the
importation and exportation of goods. These laws define how goods are classified for tariff
purposes, the valuation methods used, and the procedures for paying duties. Customs
regulations are essential to ensure compliance with international trade agreements and to
protect national security, public health, and domestic industries.

International agreements like the Kyoto Convention on the Simplification and

Harmonization of Customs Procedures (1973) and the Revised Kyoto Convention (1999)
promote uniformity in customs practices globally, ensuring that trade is conducted efficiently
across borders.

5. Trade Remedy Laws

Trade remedy laws provide mechanisms for countries to protect their domestic industries
from unfair trade practices like dumping (selling goods below cost) or subsidies that distort
competition. These laws are consistent with WTO agreements and include:

 Anti-Dumping Measures: Countries can impose duties on imported goods that are
being dumped at unfair prices and harming domestic industries, as outlined in the
WTO Anti-Dumping Agreement.
 Countervailing Duties: These duties offset subsidies provided by foreign
governments to their exporters, ensuring that domestic producers are not at a
disadvantage.
 Safeguard Measures: Under the WTO Agreement on Safeguards, countries may
temporarily restrict imports of a product if a surge in imports threatens serious injury
to domestic producers.
6. Dispute Settlement Mechanisms

A crucial part of the international trade legal framework is the dispute settlement
mechanism. The WTO Dispute Settlement Understanding (DSU) provides a structured
process for resolving trade disputes between member countries. Disputes may arise when one
country believes that another country’s policies or actions are inconsistent with WTO
agreements. The process involves consultations, mediation, and the establishment of a panel
to issue rulings, followed by the possibility of appealing through the WTO’s Appellate Body.

7. National Trade Legislation

Each country has its own set of domestic laws governing trade. These laws must comply with
international obligations and often deal with areas such as export controls, import licensing,
customs procedures, and intellectual property protection. Countries may also enact trade
policies to promote exports, regulate imports, and safeguard national interests in areas like
security, health, and the environment.

For example, the U.S. Trade Act of 1974 governs the United States' trade policies, including
the administration of trade remedies, the negotiation of trade agreements, and the
enforcement of intellectual property rights.

The legal framework of international trade is a complex, multilayered system that involves
multilateral, regional, and bilateral agreements, as well as national laws and dispute
settlement mechanisms. It is designed to promote free, fair, and predictable trade, reduce
barriers, and resolve disputes in a rule-based manner, thereby contributing to global economic
development and cooperation.
Dispute Resolution Mechanisms in International Trade

Dispute Resolution Mechanisms (DRMs) are a crucial component of international trade

law, designed to resolve conflicts between countries over trade practices in a structured, rule-
based manner. These mechanisms are vital for maintaining fairness and predictability in
global trade relations, ensuring that countries adhere to their trade obligations and resolve
disagreements without resorting to retaliatory measures, which could escalate into trade wars.

DRMs operate at different levels, from multilateral organizations like the World Trade
Organization (WTO) to regional and bilateral trade agreements, each providing specific
rules and procedures for addressing disputes.

1. World Trade Organization (WTO) Dispute Settlement Mechanism

The WTO Dispute Settlement Mechanism is the most comprehensive and widely used
system for resolving trade disputes on a multilateral level. It ensures that members adhere to
WTO agreements and provides an orderly process for dispute resolution. The system is based
on the Dispute Settlement Understanding (DSU), which is a set of rules that govern how
disputes should be handled among WTO members.

Key Features of the WTO Dispute Settlement Mechanism:

 Consultations: The first step in the WTO dispute resolution process is consultations,
where the parties involved try to resolve the issue through negotiation. If
consultations fail, the complaining party can request the establishment of a dispute
panel.
 Panel Process: A panel of experts is formed to hear the case and provide a report.
The panel examines the facts and the relevant WTO agreements to determine if a
violation has occurred. Both parties can present their arguments, and third parties with
a substantial interest in the matter may also intervene.
 Appellate Review: If either party is dissatisfied with the panel’s ruling, they may
appeal to the Appellate Body, a standing group of legal experts. The Appellate Body
can uphold, modify, or reverse the panel’s findings, but it must base its decisions
solely on legal interpretations of the WTO agreements.
 Implementation and Compliance: If the dispute is resolved in favor of the
complaining party, the offending country must bring its measures into compliance
with the ruling. If the losing party fails to comply within a reasonable time, the
complainant can request authorization from the WTO to impose retaliatory measures,
such as tariffs or trade restrictions.
 Retaliation and Compensation: If the losing party does not comply with the ruling,
the successful complainant may seek compensation or impose retaliatory measures.
The goal is to ensure compliance without further escalating the conflict.

The WTO dispute resolution system is often seen as one of the most effective and structured
international legal systems. It provides for binding decisions, transparency, and the possibility
of legal review through the Appellate Body.
Example:

 United States — Large Civil Aircraft (Boeing) Dispute: In this long-running case,
the European Union (EU) challenged U.S. subsidies to Boeing, arguing that they were
inconsistent with WTO rules. The WTO ruled in favor of the EU, allowing the
imposition of retaliatory tariffs until the U.S. complied with the ruling.

2. Dispute Resolution in Regional Trade Agreements (RTAs)

Dispute resolution mechanisms are also embedded in regional trade agreements (RTAs).
While the specific procedures vary from one agreement to another, they often reflect the
general principles found in the WTO system. RTAs such as NAFTA/USMCA, the
European Union (EU), and Mercosur have established their own dispute settlement
procedures to resolve conflicts between member states.

Key Features of RTAs’ Dispute Settlement Mechanisms:

 Consultations and Negotiations: Like the WTO system, most RTAs begin with
consultations where the disputing parties seek to resolve their issues diplomatically.
 Panels or Arbitration: If consultations fail, the dispute may be referred to a panel or
arbitration tribunal. The panel will investigate the claims, hear arguments from both
sides, and issue a report with recommendations.
 Enforcement and Retaliation: If the panel finds in favor of the complaining party,
the respondent is expected to bring its policies into conformity with the agreement. If
compliance is not achieved, the complainant may impose retaliatory measures such as
tariffs.

Example:

 USMCA (United States-Mexico-Canada Agreement): The dispute resolution

provisions of the USMCA (which replaced NAFTA) provide mechanisms for
resolving trade conflicts, particularly in sectors such as agriculture, labor, and
intellectual property rights. The agreement offers both state-to-state dispute settlement
and investor-state dispute resolution mechanisms, depending on the issue at hand.

3. Bilateral Trade Dispute Settlement

Bilateral trade agreements also include dispute settlement procedures tailored to the specific
needs of the contracting parties. These mechanisms are often faster and more flexible than
multilateral systems, as they involve fewer parties and focus on narrower issues.

Key Features of Bilateral DRMs:

 Ad Hoc Arbitration Panels: Bilateral agreements often use ad hoc arbitration panels
where each party appoints a panelist, and a third neutral party is chosen to serve as the
chair.
 Diplomatic Dispute Resolution: In some bilateral agreements, parties may prefer
diplomatic or negotiated solutions over formal legal processes, allowing for more
flexibility and less adversarial outcomes.
Example:

 Australia-China Free Trade Agreement (ChAFTA): This agreement includes

provisions for resolving disputes between the two countries over trade and investment
matters. It emphasizes consultations but allows for arbitration if negotiations fail.

4. Investor-State Dispute Settlement (ISDS)

Investor-State Dispute Settlement (ISDS) is a specific form of dispute resolution used in

many bilateral and regional trade agreements. It allows foreign investors to bring claims
directly against a host state if they believe their investment has been treated unfairly or if the
state has violated an investment protection agreement.

Key Features of ISDS:

 Arbitration Tribunals: ISDS cases are typically heard by international arbitration

tribunals, such as those administered by the International Centre for Settlement of
Investment Disputes (ICSID) or the United Nations Commission on International
Trade Law (UNCITRAL). Investors can seek compensation or remedies for
breaches of the agreement.
 Controversies: While ISDS has been effective in protecting investors’ rights, it has
also been criticized for undermining national sovereignty, as it allows corporations to
sue governments over public policy decisions, such as environmental or health
regulations.

Example:

 Philip Morris v. Australia (2011): Philip Morris, a tobacco company, challenged

Australia's plain packaging laws under a bilateral investment treaty. The arbitration
tribunal ultimately dismissed the case on jurisdictional grounds, but the dispute
highlighted concerns over ISDS’s impact on national policy.

Conclusion

Dispute resolution mechanisms are essential for ensuring that international trade operates
under a rule-based system where countries and investors have recourse when trade
agreements are violated. The most comprehensive and widely used system is the WTO’s
Dispute Settlement Mechanism, but regional trade agreements, bilateral treaties, and investor-
state arbitration provide additional avenues for resolving conflicts. These mechanisms are
critical for maintaining the integrity of international trade and promoting fair competition
among nations.
Intellectual Property Rights (IPR) in Trade

Definition of Intellectual Property: Intellectual property refers to creations of the mind,

including inventions (patents), literary and artistic works (copyright), designs, symbols,
names, and images used in commerce (trademarks). The protection of these rights encourages
innovation and creativity by giving creators the exclusive right to exploit their work for a
specific period.

Types of Intellectual Property:

 Patents: Legal protection for inventions, granting the holder exclusive rights to
produce, use, or sell the invention for a limited period, usually 20 years.
 Trademarks: Signs, logos, or symbols that distinguish goods or services of one
enterprise from others.
 Copyright: Protection for original works of authorship, such as books, music, films,
and software.
 Industrial Designs: Protection for the visual design of objects, including product
appearance and packaging.
 Trade Secrets: Confidential business information, such as formulas, practices,
designs, or processes, which provide a competitive advantage.

Importance of IPR in International Trade

IPR in trade ensures that innovations and creative products are adequately protected,
encouraging international businesses to expand across borders. Companies heavily invest in
research, development, and branding, which are safeguarded by strong intellectual property
laws.

Key Roles of IPR in Trade:

 Promotes Innovation: Companies and individuals are incentivized to invest in new

ideas, knowing that they can reap financial rewards from their innovations.
 Enhances Competitiveness: IPR enables companies to differentiate their products
through branding and technological innovation, giving them a competitive edge in the
global market.
 Facilitates Foreign Direct Investment (FDI): Strong IPR protection increases
investor confidence by providing assurance that intellectual assets are safeguarded,
encouraging companies to invest in foreign markets.
 Increases Market Access: Adequate IPR laws facilitate access to new markets by
protecting the creative and technological advancements that drive exports.

Legal Framework for Intellectual Property Rights in International Trade

IPR is protected at both national and international levels through a combination of treaties,
conventions, and domestic laws. These international frameworks provide standardized rules
and mechanisms for enforcing intellectual property rights across borders.
A. Trade-Related Aspects of Intellectual Property Rights (TRIPS) Agreement

The TRIPS Agreement, administered by the World Trade Organization (WTO), is the most
comprehensive multilateral agreement governing IPR in trade. Adopted in 1994 as part of the
Uruguay Round of WTO negotiations, TRIPS establishes minimum standards for the
protection and enforcement of intellectual property rights in WTO member states.

Key Features of TRIPS:

 Minimum Standards: TRIPS requires WTO members to meet specific minimum

standards of protection for various forms of IP, including patents, trademarks,
copyrights, and trade secrets.
 Non-Discrimination Principle: TRIPS emphasizes non-discriminatory treatment,
meaning that members must provide IP protection to foreign nationals on the same
terms as domestic nationals (national treatment) and must grant equal treatment to all
WTO members (most-favored-nation treatment).
 Enforcement Mechanisms: TRIPS outlines procedures for enforcing intellectual
property rights at the national level, including civil, administrative, and criminal
procedures to address IP infringements.
 Flexibilities for Developing Countries: TRIPS includes provisions allowing
developing and least-developed countries to delay the implementation of its standards
(transition periods) and adopt flexible approaches to IP protection for public health or
educational purposes.

B. The World Intellectual Property Organization (WIPO)

The World Intellectual Property Organization (WIPO) is a specialized agency of the

United Nations that promotes the protection of intellectual property worldwide. WIPO
administers several important international treaties that shape the global IP framework.

Key WIPO-administered Treaties:

 Paris Convention for the Protection of Industrial Property (1883): The first major
international agreement providing protection for industrial property, including patents
and trademarks.
 Berne Convention for the Protection of Literary and Artistic Works (1886): A
treaty focused on protecting authors’ rights to literary and artistic works, such as
books, music, and films.
 Patent Cooperation Treaty (PCT): Facilitates the filing of patents across multiple
jurisdictions through a single international application process.

C. Other Relevant IPR Treaties and Agreements

 Madrid System: Simplifies the process of registering trademarks in multiple

countries through a single application.
 Hague System: Allows for the international registration of industrial designs through
a single application.
 Lisbon Agreement: Protects appellations of origin and geographical indications, such
as "Champagne" for wines from a specific region of France.
Challenges in Enforcing Intellectual Property Rights

While international agreements like TRIPS and WIPO treaties provide a solid legal
framework, several challenges remain in the enforcement of intellectual property rights
across borders.

A. Counterfeiting and Piracy

Counterfeiting and piracy are significant problems in international trade, with counterfeit
goods accounting for a substantial percentage of global trade. These activities not only
undermine the rights of IP holders but also pose risks to consumers, especially in industries
like pharmaceuticals and electronics.

B. Digital Piracy

The advent of the internet has made it easier to distribute pirated content, such as films,
music, and software, globally. Digital piracy poses a significant challenge for copyright
enforcement, as the ease of sharing and downloading files complicates tracking and
prosecution.

C. Access to Medicines

The enforcement of patent rights on pharmaceuticals can create tensions between protecting
innovation and ensuring access to affordable medicines, especially in developing countries.
TRIPS includes flexibilities, such as compulsory licensing, to balance these concerns, but the
issue remains contentious.

D. Diverging National Laws

Despite international agreements, national IP laws can vary significantly, making it difficult
for businesses to navigate different legal systems. Harmonizing laws and ensuring effective
enforcement across borders is a continuous challenge.

Case Studies: Intellectual Property Rights in Trade

A. The Apple-Samsung Patent Dispute

The legal battle between Apple and Samsung over smartphone patents is a notable example
of how IP disputes play out in the global marketplace. Apple sued Samsung in multiple
countries, alleging that Samsung infringed on its design and utility patents. The case
highlighted the complexity of enforcing patents in different jurisdictions, with varying
outcomes in different courts.

B. Pharmaceutical Patents and Public Health

The issue of pharmaceutical patents became particularly prominent during the HIV/AIDS
crisis in the late 1990s. Many developing countries, such as South Africa, sought to use
compulsory licensing provisions under TRIPS to produce cheaper generic versions of
patented antiretroviral drugs. This led to a global debate on balancing IP rights with the need
to address public health emergencies.

Conclusion

Intellectual property rights play a crucial role in international trade by fostering innovation,
ensuring competitiveness, and facilitating global commerce. The TRIPS Agreement, along
with other international treaties administered by WIPO, provides a comprehensive framework
for the protection of intellectual property across borders. However, significant challenges
remain, particularly in the enforcement of IP rights, the fight against counterfeiting and
piracy, and ensuring equitable access to essential goods like medicines. As international trade
continues to grow, strengthening the global IP system will remain a priority for policymakers
and businesses alike.
Case Studies of Major Trade Disputes

Trade disputes arise when countries or trading entities disagree on the interpretation or
application of trade agreements, often leading to investigations, sanctions, or retaliatory
measures. These disputes are typically resolved through diplomatic negotiations, legal
adjudication, or dispute resolution mechanisms established under international frameworks
such as the World Trade Organization (WTO). Here are some notable case studies that
highlight key aspects of trade disputes, including their causes, resolution mechanisms, and
outcomes.

1. United States – Steel and Aluminum Tariffs (2018)

Overview:

In 2018, the United States, under the Trump administration, imposed tariffs on steel (25%)
and aluminum (10%) imports, citing national security concerns under Section 232 of the
Trade Expansion Act of 1962. The tariffs affected numerous trading partners, including the
European Union (EU), Canada, Mexico, China, and others. These countries argued that the
tariffs were unjustified under WTO rules and retaliated by imposing their own tariffs on U.S.
products.

Key Issues:

 The U.S. justified the tariffs under national security grounds, claiming that reliance
on foreign steel and aluminum could undermine U.S. defense capabilities.
 Affected countries argued that the tariffs violated WTO rules because they were
essentially protectionist measures disguised as national security concerns.

Dispute Resolution:

Several countries, including the EU, China, and Canada, filed complaints with the WTO
Dispute Settlement Body (DSB), claiming that the tariffs violated the WTO's Agreement on
Safeguards. The U.S. argued that the national security exception in Article XXI of the
General Agreement on Tariffs and Trade (GATT) allowed such measures.

 The case is still ongoing in various dispute settlement panels, but retaliatory tariffs
imposed by affected countries have strained trade relations between the U.S. and its
trading partners.

Outcome:

While the WTO has not yet issued a final ruling on this case, the tariffs and retaliatory
measures caused significant disruptions to global steel and aluminum markets. The Biden
administration has since negotiated deals with the EU and other partners to ease these tariffs,
though legal proceedings at the WTO continue.

:
2. Boeing vs. Airbus: The Large Civil Aircraft Dispute (2004–2020)

Overview:

The Boeing-Airbus dispute is one of the longest and most complex trade disputes in WTO
history. It began in 2004 when the U.S. accused the European Union of providing illegal
subsidies to Airbus, allowing it to undercut Boeing in the global civil aviation market. The
EU, in turn, claimed that Boeing received illegal subsidies from the U.S. government. Both
sides filed cases at the WTO, accusing each other of violating trade rules by distorting the
global aircraft market through subsidies.

Key Issues:

 The U.S. argued that EU member states, particularly France, Germany, Spain, and the
UK, provided launch aid subsidies to Airbus, which unfairly reduced the company’s
cost of developing new aircraft.
 The EU claimed that Boeing benefited from military contracts and tax incentives
from the U.S. government, particularly from NASA and the Department of Defense.

Dispute Resolution:

The WTO ruled in favor of both parties at different stages of the dispute:

 In 2010, the WTO found that Airbus had received illegal subsidies, leading to a
distortion of the civil aviation market.
 In 2012, the WTO ruled that Boeing had also benefited from illegal subsidies,
particularly in the form of tax breaks and military contracts.

The dispute escalated further when both parties were authorized by the WTO to impose
retaliatory tariffs on each other's products:

 In 2019, the U.S. imposed $7.5 billion in tariffs on European goods, targeting a wide
range of products, including wine, cheese, and aircraft parts.
 In 2020, the EU was authorized to impose $4 billion in tariffs on U.S. goods,
targeting Boeing jets, agricultural products, and other industrial goods.

Outcome:

In 2021, both sides reached an agreement to suspend tariffs for five years and work towards
resolving the underlying issue of subsidies. The resolution marks a significant de-escalation
of the dispute and sets the stage for future negotiations to prevent similar conflicts.
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