Washington state should refrain from tinkering with its Boeing tax-subsidy program until WTO appeals are complete.
The World Trade Organization’s (WTO) ruling against Boeing tax subsidies puts Washington state in an awkward position.
Until appeals are exhausted and provide more clarity, the state should hang tight and refrain from tinkering with the complex and controversial subsidy legislation. Besides, the 2017 Legislature has more than enough work to do already.
In its ruling last Monday, the WTO decided that a business-and-occupation tax break created to retain Boeing’s 777X wing and assembly in Washington is prohibited by trade rules.
In particular, the trade body objects to a clause in the 2013 tax deal that requires Boeing to assemble the plane and its wings within the state.
This is prohibited because it favors a local product over imported products; a key principle of WTO trade agreements is that domestic and foreign goods should be treated equally.
While Washington is a state that supports and depends on free trade, it also needed the protection of the “build local” clause in the Boeing tax package. Especially after Boeing received a similar package for the 787 and then opened a second production line in South Carolina.
When the Boeing tax package was extended in 2013, the state needed assurance that it wasn’t subsidizing a product that would be built elsewhere. The clause was included and Boeing received tax breaks worth potentially $8.7 billion over 25 years.
Benefits of the state investment can be seen in Everett, where Boeing has now spent more than $1 billion on its facility for building advanced, composite wings for the 777X.
This work involves a constellation of suppliers. It also expands the cluster of companies and expertise working with advanced composites in Washington.
That cluster, the jobs it supports and the future opportunities it creates should continue, regardless of what happens with the WTO.
The U.S. is expected to appeal last week’s ruling, which will further extend an interminable feud over aerospace subsidies that began with a 2004 complaint about Airbus product-launch subsidies. That led to European complaints about Boeing subsidies.
Such trade disputes seem distant and inconsequential until the WTO authorizes retaliatory tariffs — a tool it uses to press governments to comply with trade rules. Then people’s jobs and income are jeopardized by the loss of international business.
That’s the last thing we need in the current political climate, with Democrats and Republicans questioning the benefits of free-trade agreements and a blustery, protectionist president-elect.
Waiting for the WTO process to work its course for a few more years could be a way for Washington state and the Boeing dispute to ride out this political storm over trade.
Washington may eventually have to modify its aerospace-retention plan to help the U.S. comply with WTO trade agreements. But the state should wait to tinker until appeals are complete and there’s more clarity about what, if any, changes are needed.