Boeing offered illegal tax breaks in US, trade body says

KING 5's Glenn Farley reports.

GENEVA - A World Trade Organization panel on Monday ruled that Washington state offered billions in illegal tax breaks to plane maker Boeing, and that the U.S. government must take action to end the plans within months.

The European Union, which backs Boeing's EU-based rival, Airbus, claimed it as a landmark victory in the longstanding battle between the two companies that dominate the global market for airplanes.

The ruling is but a part of a wider squabble involving accusations between the U.S. government and the 28-nation EU over support for Boeing and Airbus dating back to 2004.

Monday's decision found that the support Washington state promised to give Boeing from 2024 to 2040 amounted to "prohibited" subsidies. The support offered by Washington came on the condition that Boeing keeps the production of the wings of the wide-bodied 777x plane in the state, excluding foreign competition.

Boeing has extensive plants around Seattle, and the EU says the subsidies would have amounted to $8.7 billion. EU Trade Commissioner Cecilia Malmstrom said the WTO ruled against $5.7 billion of the measures.

But both Boeing and the State of Washington don't see the ruling as any sort of disaster, claiming that six of the seven points raised by the E.U. were thrown out by the WTO.

"And if you look at the overall European subsidy of Airbus, it's not even in the same league," said Washington State Senator Reuven Carlyle, who as a representative was the author of the legislation. "I don't think it's problematic in the large scale."

Airbus contends the tax breaks connected to the 777X have cost the European plane maker $50 billion in sales already.

Both companies have publicly railed at each other over the decades over the trade issues. 

The case could have some implications for President-elect Donald Trump's ambitions to support U.S. business first and foremost.

Malmstrom called Monday's ruling "an important victory for the EU and its aircraft industry."

"We expect the U.S. to respect the rules, uphold fair competition, and withdraw these subsidies without any delay," Malmstrom said in a statement.

Boeing is vowing to appeal. The case is expected to be heard late in 2017 or early 2018. The case, filed in 2014, has taken two years to get this far.

Both Boeing and Airbus are producing most of their planes at record rates. Earlier in 2016, Airbus set up a factory building A-320 single aisle aircraft in Mobile, Alabama after that state offered incentives. The Washington legislature and Governor Jay Inslee felt they had to come up big after Boeing threw open the competition to build the 777X to other states around the country.

Airbus had already confidently predicted victory at the WTO over the Washington state tax incentives, saying during the latest tit-for-tat showdown in September that the alleged subsidies would "almost certainly be condemned as illegal." Airbus had made that assertion after the trade body had found that the EU had provided billions of dollars of improper subsidies to the European plane maker.

Copyright 2016 KING


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