U.S. Appeals WTO Ruling on Boeing Subsidies

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By Brian Flood

The U.S. launched its appeal of a World Trade Organization ruling that found aircraft giant Boeing Co. received an illegal tax subsidy.

The U.S. is seeking to defend a Washington state tax break, the latest chapter in a long-running feud over the U.S. and European Union's respective boosts for their aircraft makers. The tax cut is worth $50 million a year, Boeing said.

In 2013, the Washington state Legislature extended a series of seven tax breaks, which together the European Trade Commission called the “largest subsidy for the civil aerospace industry in U.S. history.”

The WTO dispute resolution panel rejected the EU's challenges to six of the programs, but it said that one, which cut the state's “business and occupation” tax in return for Boeing basing its production of 777X aircraft wings in the state, was discriminatory.

The WTO panel said the tax incentive amounted to a de facto subsidy that violated the WTO's Subsidies and Countervailing Measures Agreement, which prohibits subsidies that are contingent on the use of domestic over imported goods.

A Boeing spokesman told Bloomberg BNA that the WTO panel was wrong in concluding that the incentive was a prohibited subsidy, and that the company fully supports the government's appeal.

The EU has until the end of January to decide whether it too wants to appeal the parts of the ruling that didn't go its way.

If the U.S. ultimately loses before the WTO Appellate Body, it would have to bring the tax incentives into compliance or face retaliatory duties from the EU.

Airbus Appeal

At the same time, the U.S. is pursuing its own case against the EU for subsidies that allegedly unfairly benefitted the European aircraft consortium, Airbus Group SE.

In September, a WTO panel found that the EU hadn't yet fully complied with a previous ruling that struck down a series of equity infusions, infrastructure grants and “launch aid” loans to finance the design and development of Airbus planes. The U.S. claims that such subsidies amounted to $22 billion and costs the U.S. tens of billions of dollars annually in lost exports.

Those programs seriously prejudiced U.S. interests, the panel found. The EU is appealing that decision, saying the panel made serious legal errors.

These and other disputes stem from the from the dissolution in 2004 of a bilateral EU-U.S. agreement on trade in large civil aircraft that permitted each party to provide a certain level of support to their domestic aircraft industries.

According to the Aerospace Industries Association, the commercial aerospace industry in the U.S. employs 531,000 workers, and workers there earn 44 percent above the national average.

To contact the reporter on this story: Brian Flood in Washington at bflood@bna.com

To contact the editor responsible for this story: Jerome Ashton at jashton@bna.com

For More Information

Additional information on the appeal is available at https://www.wto.org/english/news_e/news16_e/ds487apl_16dec16_e.htm.

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