Boeing Maneuvers To Head Off WTO Sanctions

 - February 20, 2020, 10:02 AM
Mechanics in 2017 prepare to move the first 777X wing into position for completion ahead of its eventual installation at Boeing's widebody plant in Everett, Washington. (Photo: Boeing)

Boeing has asked Washington State lawmakers to draft legislation that would rescind tax breaks to the company introduced more than a decade-and-a-half ago and renewed in 2013 to attract 777X wing production to the state. The move, designed to head off retaliatory tariffs planned by the European Union on Boeing airplanes and other goods from Washington, would theoretically end the EU’s rationale for imposing any trade measures that would effectively counter tariffs placed on Airbus products by the U.S.

The U.S. Trade Representative (USTR) recently announced its determination to increase the duties from 10 to 15 percent on new Airbus commercial aircraft of more than 30 tonnes. Based on the WTO ruling of the subsidy case against Airbus, the U.S. may impose tariffs of up to 100 percent on $7.5 billion of annual EU imports—including Airbus aircraft. The new duty rate follows a compliance report from the Geneva trade watchdog, released in December, that found that changes made to Airbus A350 and A380 development loans did not bring the four so-called Airbus countries—France, Germany, Spain, and the UK—in compliance with WTO recommendations. 

“Boeing applauds the actions [Wednesday] by Washington State leaders to introduce this legislation,” said Boeing in a statement. “We fully support and have advocated for this action. When enacted, this legislation will resolve the sole finding against the United States in the long-running trade disputes between Europe and the United States over government support for the production of large commercial airplanes. This legislation demonstrates the commitment of Washington—and of the United States—to fair and rules-based trade, and to compliance with the WTO’s rulings.

“Now is the time for Airbus and the European Union to finally come into compliance by ending illegal launch aid subsidies once and for all and addressing the harm they have caused the United States aerospace industry and its workers.”

Trade officials expect the World Trade Organization to follow its latest ruling against the EU for the bloc’s billions of dollars in launch aid to Airbus with sanctions against the U.S. for its own anticompetitive behavior to benefit Boeing.

The loss of the tax breaks will also apply to smaller companies in Boeing’s supply chain based in Washington, several of whom have benefitted over the years from a 40-percent reduction in the state’s business and occupation tax.