Boeing scored a victory on Monday in its ongoing back-and-forth with the European Union over subsidies even in the face of the a World Trade Organization ruling that asserts a state tax break for the aerospace giant will help to develop its new 777x jetliner was actually prohibited.
Of course, the WTO laments a renewed tax cut provided by Washington to Boeing (in 2013)–when the company was, at one point, considering where to puts its new long-haul jet assembly base. Obviously, the European Union backs the EU-based Boeing rival Airbus, so Boeing saw this as a “landmark victory” over a continued dispute that goes back as far as the mid-2000s.
Now, Boeing has stated that the EU has challenged seven different state tax incentives—to a total of about $8.7 billion—but only one was actually found to be permissible: to the tune of $50 million per year. At the same time, the WTO determined that Boeing has not received any benefits from this 777x rate incentive, to date, and will likely not receive any such benefit until 2020. That is when the first plane is expected to be delivered.
Indeed, Boeing general counsel J. Michael Luttig asserts, “Today’s decision is a complete victory for the United States, Washington State, and Boeing.”
Luttig also note that in September the Two ruled that Airbus had actually received $22 billion in illegal subsidies from the EU. Of course, the EU appealed this decision in October. He goes on to say, “The WTO has repeatedly found that Airbus is entirely a creature of government, and they must now bring themselves into compliance with the international laws or risk massive sanctions.”
Now, the WTO cannot force anyone to comply with rules and it cannot simply drop payments. However, the agency can authorize retaliatory measures that are designed to pressure governments to respect the rules.
As such, European Union Trade Commissioner Cecilia Malmström was pleased by the ruling, Monday, now calling for the removal of the prohibited tax break.
She argues, “We expect the US to respect the rules, uphold fair competition and withdraw these subsidies without any delay.”