Inslee proposes extending 787 tax credits for 777X, but they were ruled illegal in WTO case

Washington Gov. Jay Inslee has proposed extending the state tax credits to Boeing as an incentive to land the assembly of the 777X.

The Puget Sound Business Journal has this report.

The Seattle Times is a bit more detailed.

Here is the Governor’s speech (17 pages) with the details.

Inslee predicted quick approval by the State Legislature, which returns to session in January.

The tax breaks were those granted to Boeing to land the assembly of what was then known as the 7E7, later renamed the 787.

There is one little issue, however. The 787 tax breaks were found to be illegal under World Trade Organization rules in the highly contentious international trade dispute between Airbus (the European Union) and Boeing (the US Trade Representative) over illegal subsidies.

The WTO found Airbus and Boeing each received illegal subsidies or tax breaks, and Boeing’s from Washington State were among those found to be illegal.

The US and EU each appealed the respective WTO rulings.

We asked the director of the Governor’s Office of Aerospace about this. His reply:

“The case is still being adjudicated and they are still in effect. Until something changes, the industry is still benefiting.”

6 comments on “Inslee proposes extending 787 tax credits for 777X, but they were ruled illegal in WTO case

  1. Now if I remember correctly, and maybe somebody can correct me, the last time WTO found US airliner makers had received illegal subsidies the EU put import duties on US agricultural products. If they had tried to put more duties on planes European airlines would have ended up paying the bill. There is no rule saying they have to punish Boeing in particular, they can “take it out” on any US imports. That means what is bad for the US might still be good for Washington state and Boeing.

    • MartinA,

      I think you are wrong here. This not about illegal custom duties covering a range of product. There is a legal ruling identifying The Boeing Company as having received illegal subsidies.

      ‘Technically’, however, the 777X, as a new project, might be outside the direct scope of the ruling (this must have been been checked by Boeing’s lawyers – the same applies to the A350 in the Airbus case), though there is no doubt that the case is the same. The US also has appealed the WTO’s ruling, but I am not sure this is a valid reason for non compliance.

      I doubt however that challenging the WTO will do more than buy time. For the future, if Boeing wants the tax credits, the only way is to settle the dispute with Airbus by negociation, if Airbus agrees … in order to get their own tax credits in Alabama.

      • Maybe I wasn’t clear, the result of loosing a WTO case like this is that the “victim” country can impose duties on goods from the offending country which would otherwise be duty free or have lower duties. When the US was previously found to have subsidised Boeing, McDonnell Douglas and Lockheed the EU put extra import duties on some American goods, but not on goods supplied by the airplane makers in question.

      • ps so even if, in five years time, the WTO rules that Washington tax breaks for Boeing to build the 777X there are illegal, it might not effect Washington state or Boeing, it might effect Iowa or Texas. Good for Washington, bad for the USA.

  2. Pingback: Chasing the 777X assembly site | Leeham News and Comment

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