The World Trade Organisation has ruled that a tax benefit given by the state of Washington to aerospace giant Boeing is unlawful, giving them 90 days within which to revoke it.
The tax subsidy was under investigation after a complaint made by the European Union, as part of a decade long battle over the subsidies of US and EU aerospace companies.The tax cut given by the state of Washington gave Boeing a low “business and occupation” tax rate, in order to ensure that wings for Boeing’s new 777X jetliner were made only there.
“The Panel has found that the European Union has demonstrated that the B&O aerospace tax rate for the manufacturing or sale of commercial airplanes under the 777X programme… is a subsidy contingent upon the use of domestic over imported goods [and is] prohibited,” said the WTO in its ruling.
The US can appeal the ruling, and a Boeing official said it expects the judgment to be overturned. In a statement, the company said:
“The EU claimed that Boeing had received $8.7 billion in subsidies. This claim was rejected by the WTO, which found future incentives totalling no more than $50 million a year to be impermissible.
“The WTO found that to date Boeing has received no benefit from the 777X (tax) rate incentive, and will not until 2020, because the first airplane will not be delivered until then.”
However EU Trade Commissioner Cecilia Malmström commented: “We expect the U.S. to respect the rules, uphold fair competition, and withdraw these subsidies without any delay.”
The decision is the latest in a ten-year history of challenges between the US and the EU over government cuts given to Boeing and European rival Airbus Group. Unless a compromise is agreed to, the two blocs are likely to impose high tariffs upon goods and services unconnected to the engineering of the aircraft.