[Reuters| November 28, 2016 |The New York Times]
The World Trade Organization ruled on Monday that a tax break from Washington State to help Boeing develop its new 777X jetliner was a prohibited subsidy. The ruling was a setback for the aerospace giant as it seeks victory in a parallel case against its European rival, Airbus.
The trade organization said the subsidy came in the form of a renewed cut in Washington State’s main business tax for aerospace. The state agreed to the tax cut in 2013, when Boeing was considering where to assemble the latest member of its long-haul jet family.
It is the third time that taxpayer support for Boeing or Airbus has been faulted by the World Trade Organization in a trans-Atlantic trade spat dating back 12 years and involving mutual accusations of tens of billions of dollars of aid.
The ruling can be appealed by either side. The United States is considering sanctions against the European Union over Airbus subsides that were previously ruled illegal.
The trade organization did not give a value for the banned aid in its latest ruling, but the European Union estimated it at $5.7 billion out of an $8.7 billion tax package in Washington, where most Boeing factories are based.
Airbus said the measures had cost it $50 billion in sales.
Boeing said the aid in question would kick in only from 2020 and would be worth $50 million a year, a fraction of the total amount at stake in what has been called the world’s largest trade dispute.
The ruling backed European Union claims that another six measures provided subsidies to Boeing, but rejected arguments that these fell into the most toxic category being reviewed by its panel.
It urged the United States to withdraw the prohibited subsidy in 90 days, but did not say how this should be done, prompting disagreements between American and European representatives about how much Boeing would have to give up and when.
Boeing officials and lawyers played down the prospect of having to pay back any support, noting there was no money to discuss until deliveries of the new jet started in 2020.
They said they were confident the ruling would be overturned on appeal and insisted the tax breaks were dwarfed by $22 billion in subsidized loans by European governments to Airbus, adding that these could spur United States retaliation within a year.