WTO rules against 777X tax break

The World Trade Organization (WTO) has ruled out today that a tax break from Washington State to help Boeing develop the 777X was a prohibited subsidy.

A render of a B777-9X. Copyright: Boeing

Back in November 2013, Washington state lawmakers were asked to approve a package of incentives to ensure that the 777X would be built exclusively in Washington State.

These incentives included an extension of tax breaks through 2040, including Business and Occupancy (B&O) taxes, sales &a use tax exemptions and breaks for property and building projects.

According to the report from the WTO Panel (DS487), the tax break belongs to “a special category (…) which Members have deemed to create such trade distortions that they are proscribed,” as these are “specifically designed to affect trade.”

“The United States and Boeing picked this fight at the WTO, and today’s ruling is yet another blow for that strategy,” said Tom Enders, chief executive officer, Airbus Group.

“We hope this outcome will lead those at Boeing who advocate continuing this trade dispute to reconsider,” Enders continued.

The WTO rejected the European Union’s challenge to six of the seven tax measures and rejected most of the challenge to the seventh. The panel from the WTO found that to date Boeing has not received any benefit from the 777X incentives, and will not until 2020, as the first airplane will not be delivered until then.

“The WTO found in September that Airbus has received $22 billion in illegal subsidies from the EU and that without these subsidies neither Airbus itself nor any of its airplanes would even exist today,” J. Michael Luttig, Boeing’s general counsel said in a statement.

“By contrast, in rejecting virtually every claim made by the EU in this case, the WTO found today that Boeing has not received a penny of impermissible subsidies,” Luttig concluded.

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