The World Trade Organization (WTO) has ruled that a tax break from Washington state to help Boeing develop its new 777X jetliner was a prohibited subsidy – a victory for Airbus and EU regulators.
US aircraft manufacturer Boeing had received forbidden subsidies for its 777X wide-body passenger jet, the World Trade Organization (WTO) said Monday, as they encouraged the use of domestic materials and fuel unfair trade distortions.
The WTO said the subsidy came in the form of a renewed cut in Washington state’s main business tax for aeropsace agreed in 2013, when Boeing was considering where to base assembly its latest long-haul jet.
The trade body didn’t give a value for the banned aid, but the EU estimated it at $5.7 billion (5.2 billion euros) out of an $8.7-billion package of tax measures granted to the planemaker by Boeing’s home state of Washington.
Bob Novick, an outside counsel representing Boeing, criticized the rationale behind the decision to strike down the Washington state Business and Occupancy (B&O) tax rate as wrongly concluding that the law favored the domestic manufacturing of goods because Boeing had not imported the wing for the 777x as it had for the 787 plane.
“The WTO jumped to the conclusion that somehow the law favored domestic over imported,” he told reporters in a conference call.
The US company also said the aid in question would only kick in from 2020 and would be worth $50 million a year, a fraction of the total amount at stake in the world’s largest trade dispute.
Boeing added that it was confident the ruling would be overturned on appeal and insisted its tax breaks were not nearly as high as the $22 billion Airbus had received in subsidized loans by European governments.
War over subsidies
The ruling is WTO’s third in the two aerospace giants’ disputes over illegal state aid. Mutual accusations involve tens of billions of dollars allegedly received by the other.
European Union Trade Commissioner Cecilia Malmström welcomed the ruling on Monday, calling for the prohibited tax break to be scrapped immediately.
“We expect the US to respect the rules, uphold fair competition and withdraw these subsidies without any delay,” she said.
Meanwhile, Boeing’s rival Airbus called for a fundamental solution to the subsidies dispute. On Monday, Airbus Chief Executive Tom Enders said in an emailed statement that the rivalry should no longer set the “framework of reference in future,” noting recent support by the Quebec government for Canada’s Bombardier.
“I continue to think that the only way out of the ridiculous series of disputes initiated by the US is to agree on a set of globally applicable rules for the support of the civil aircraft industry, which would benefit both sides of the Atlantic,” he said.