WTO Rules Against State Tax Breaks For Boeing

Nov 28, 2016

The World Trade Organization ruled Monday that the tax incentives offered by Washington state to Boeing are illegal.

Monday's decision is the first in the latest case brought by the European Union against the Chicago-based airplane manufacturer.

In this case, the WTO found that the tax breaks Washington promised to give Boeing for the future production of its 777X wide-body plane are considered "prohibited" subsidies. At issue is a condition of the incentives that would keep 77X wing-production in the state.

Boeing and its E.U. rival Airbus have been fighting over potentially illegal government subsidies since the U.S. brought suit against Airbus in 2004. The E.U. filed a counter-suit a year later, and there has been a series of rulings and appeals since then.

Richard Aboulafia is an aviation analyst at the Virgina-based Teal Group. He says the WTO's decision probably won't affect Boeing's bottom line because another appeals process is likely.

"It's a little like the weather in Seattle," he said. "If they don't like the ruling, they can wait five minutes and it'll change in some way."

That constant volley isn't necessarily good for trade, he said. The best case scenario is for governments to come together and agree to limit support for the industry. 

"The worst case scenario is that you have protectionist politicians on both sides, seeing what they want to see, and retaliating with tariffs or worse," he said.

There is a possibility the U.S. could be authorized to instigate trade sanctions against the E.U. if Airbus loses its appeal in another recent ruling on its "launch-aid" loans.