Yesterday, the World Trade Organization either ruled for or against (or somewhere in between) The Boeing Company in a challenge to the Washington state aerospace tax incentive package adopted by the European Union on behalf of Airbus.
“Today’s decision is a complete victory for the United States, Washington State and Boeing,” said J. Michael Luttig, Boeing’s general counsel. “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. 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.”
The World Trade Organization (WTO) today rejected virtually all of the European Union’s challenges to the Washington state tax incentives.
In today’s case, the EU challenged seven different state tax incentives. 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.
We’re inclined to agree with Boeing, but note that the decision has received, at best, mixed reviews, as this Leeham News headline suggests: Airbus, Boeing claim victory in today’s WTO ruling over Washington tax breaks.
The statements from Airbus and Boeing are so at odds that they don’t appear to be reacting to the same WTO decision.
And so on. You can read more of the back-and-forth at AP, Reuters, the Seattle Times, and McClatchy. The analysis suggests nothing is likely to happen swiftly. There will be appeals and politics. But, as Dominic Gates writes in the Seattle Times,
…Boeing has already built the huge facilities for making the 777X fuselage and wing in Everett. It’s spending $1 billion on the composite wing center alone.
“The facilities are on the ground. We’ve spent the money,” said Ted Austell, Boeing vice president for trade issues.
…Austell added that if the state needs job guarantees, Boeing could write those into its labor contracts with the unions. The WTO has no role in adjudicating contracts, only laws.
It’s complicated stuff, certainly. Less complicated is the fact that the incentive package did what it was designed to do: Secure aerospace work for Washington by extending tax policies adopted in the early part of this century.
Three years ago, lawmakers passed, on a bipartisan basis, a package of legislation that resulted in the Boeing 777X being assembled in Washington state, ensuring the health of the Washington aerospace industry and sustaining jobs in our state. That was the right thing to do for our state’s economic future and it still is.
“If that’s the strength of their entire case compared to the U.S. case against the European Union, that’s little league versus the majors in terms of scale,” he said.
Carlyle said that if the ruling were upheld on appeal and there wasn’t some type of negotiated solution, the Legislature has options, adding that “the ability to continue to solidify Washington state’s role with the aerospace industry is in no way compromised.”
We wrote earlier of the importance of the incentive package, which – it must be repeated – costs Washington taxpayers nothing while returning millions of dollars in investment and tax revenues and preserving and creating jobs. And for more on that “mythical $8.7 billion tax break,” we recommend this comprehensive 2014 Washington Research Council analysis.
However the international politics plays out, the policy has been, in the words of Boeing executive Luttig, “a complete victory,” delivering what was required and desired.