The World Trade Organization on Monday agreed to set up a panel to examine European Union allegations that Washington state’s $8.7 billion in Boeing tax breaks to land the 777X in Everett are subsidies barred under global trade rules.
GENEVA — The World Trade Organization on Monday agreed to set up a panel to examine European Union allegations that the $8.7 billion in Washington state tax breaks for Boeing to build the 777X in Everett are subsidies barred under global trade rules.
The EU’s legal adviser, Mikko Huttunen, told WTO delegates the state’s incentives create “a massive disadvantage” to the European aircraft industry, diplomats who attended the session said.
The U.S. delegation did not block creation of the panel but countered that the incentives are “fully consistent” with U.S. obligations under the WTO accords, sources familiar with the closed-door proceedings said.
Boeing spokesman Charlie Miller defended the tax breaks, saying they were not offered uniquely to Boeing.
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“The tax measures the EU challenges today are not market-distorting subsidies,” he said. “They are available to all aerospace companies, including Airbus and its suppliers.”
He called the EU’s complaint an attempt to divert attention from Europe’s own massive subsidy for aircraft development by Airbus, which is based in France, and was founded by France, Spain, Germany and the United Kingdom. At issue is so-called “launch aid,” low-interest or no-interest loans for the development of an aircraft that don’t have to be repaid if the aircraft is not a commercial success.
“European governments have provided, and continue to provide, massive amounts of launch aid to Airbus for every airplane development program,” Miller said. “It is an effort to further delay EU compliance with the WTO’s 2011 ruling that launch aid is an illegal, market-distorting subsidy.”
The new dispute is the latest in a decadelong, multibillion-dollar fight between the world’s two biggest commercial-jet makers. The WTO ruled in 2010 and 2011 that both the United States and the EU had violated international trade agreements by providing their manufacturers billions of dollars in subsidies, and those rulings were upheld on appeal in 2011 and 2012.
But both sides are still engaged in the battle, awaiting a ruling expected this year by the WTO’s Dispute Settlement Body on whether the U.S. and the EU have complied with the early findings.
Diplomats said the EU’s Huttunen argued that a 2013 decision by Washington state to extend until the end of 2040 “very significant” tax breaks for Boeing violated a 2012 WTO ruling that the incentives were illegal.
In its Feb. 13 complaint, the EU claimed the state violated the ruling by making the tax incentives contingent upon placing production of the wings and final assembly for any new commercial aircraft or variant in Washington and maintaining all wing assembly and final assembly of such commercial aircraft exclusively in the state.
While Boeing assembles aircraft in Washington, Airbus’ final-assembly location is outside Toulouse, France.
Boeing’s 777X is the latest variant of the 777 widebody aircraft, which are described as the world’s largest twin-engine commercial airliner, capable of carrying as many as 400 passengers and traveling more than 9,000 miles. It is designed to compete with Airbus’ A350, which can carry as many as 360 passengers.
The two companies closely watch each others’ sales in an annual competition that Boeing won last year, when it sold nearly twice as many widebody aircraft as Airbus.