WTO Dings Washington State Over Tax Breaks to Boeing

(CN) – The World Trade Organization said Monday that 30-year tax breaks given to Boeing by Washington state to produce the 777X airliner violate international agreements on subsidies and countervailing measures.

The WTO’s decision comes in response to a complaint by the European Union, which argued that Washington state’s amendment and extension of tax incentives for the aerospace industry through 2040 went against previous WTO rulings. The EU complained that the tax breaks given to Boeing are contingent on the use of domestic goods in the production of the 777X, specifically its wings.

Boeing is headquartered in Renton, Washington. The 777X will compete with France-based Airbus’ A350 aircraft. German carrier Lufthansa has already ordered 34 of the 777X to replace its aging 747s, with delivery expected by 2020.

The WTO found that Washington state’s decision to make reduced business and occupation tax rates contingent on Boeing’s use of domestic over imported goods discriminates against foreign producers, and violates two articles of the Subsidies and Countervailing Measures Agreement.

European trade commissioner Cecilia Malmstrom hailed the WTO findings and called on Washington state to claw back the subsidies.

“Today’s WTO ruling is an important victory for the EU and its aircraft industry. The panel has found that the additional massive subsidies of $5.7 billion provided by Washington state to Boeing are strictly illegal. We expect the U.S. to respect the rules, uphold fair competition, and withdraw these subsidies without any delay,” Malmstrom said in a statement.

The European Commission said the WTO is expected to issue its findings in another long-running dispute involving U.S. subsidies to Boeing soon.

That complaint, also brought by the EU, involves tax breaks to Boeing from cities and states including Washington state, Kansas and Illinois, and federal agencies including NASA, the Pentagon and the Departments of Commerce and Labor.

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