Global trade authority finds tax abatements for 777X assembly operation constitute an unauthorized subsidy
- Boeing claims success
- EU, Airbus claim vindication
- Appeal by whom?
In 2013, the State of Washington granted a series of tax abatements to Boeing relating to its 777X assembly operation in Everett.
In a dispute between the United States and the European Union, the World Trade Organization ruled that The Boeing Co. received an unauthorized subsidy in 2013 in the form of tax abatements from the State of Washington, relating to Boeing’s 777X assembly operations there. Boeing’s rival Airbus welcomed the ruling (which stems from a 2014 complaint filed by the EU), and yet Boeing characterized the long-awaited decision as favorable.
WTO has frequently received complaints regarding unauthorized subsidies in commercial-aircraft manufacturing, including numerous cases brought by the U.S. concerning EU support for Airbus.
In the current case, Boeing noted that the WTO “rejected entirely the EU's challenge to six of the seven incentives, and rejected most of the challenge to the seventh.
“The WTO held only and narrowly that a reduction in Washington State's Business and Occupancy (B&O) tax rate for future 777X revenues is inconsistent with the WTO agreements,” according to Boeing’s statement.
While the EU claimed that Boeing had received $8.7 billion in subsidies, the WTO found violation with only $50 million of future annual incentives. Further, WTO found that to0date Boeing has received no benefit from the 777X rate incentive, and that the benefits will not be realized until the first jets are delivered in 2020.
The 777X is a redesigned version of the 777 long-range, wide-body jet that is the world’s largest twin-engine aircraft. It will be available in two models, the 777-8X and 777-9X. While the aircraft consists of thousands of parts and systems sourced from multiple suppliers and locations, the assembly will be conducted at Boeing’s complex in Everett, Wash.
The European Union’s finance regulating agency, the European Commission, also described the ruling as a “major win”: “The [WTO] panel has found that the additional massive subsidies of $5.7 billion provided by Washington State to Boeing are strictly illegal,” EU Trade Commissioner Cecilia Malmstrom stated. “We expect the U.S. to respect the rules, uphold fair competition, and withdraw these subsidies without any delay.”
Also, Airbus issued a lengthy statement, with comments about the ruling and a detailed analysis of the Washington State’s subsidies to Boeing and the 777X program:
“The United States and Boeing picked this fight at the WTO, and today’s ruling is yet another blow for that strategy,” stated Tom Enders, CEO of Airbus Group. “Those prohibited subsidies must be withdrawn immediately following today’s historic ruling, meaning that Boeing must give up these massive tax subsidies.”
The U.S. is eligible to appeal the ruling, though Boeing’s general counsel offered an alternative view in the company’s statement: "Today's decision is a complete victory for the United States, Washington State, and Boeing," according J. Michael Luttig. “After any appeal, we fully expect Boeing to preserve every aspect of the Washington state incentives, including the 777X revenue tax rate."