A World Trade Organization appeals-court ruling issued Monday says the 2013 extension of Washington state’s aerospace tax incentives did not include prohibited subsidies. The decision effectively ends one of three WTO cases arising from government support of Airbus or Boeing.
Finally, one of the lawsuits against Boeing before the World Trade Organization, an international court that adjudicates legal cases at glacial speed, has actually come to an end — and with a resounding U.S. victory.
A WTO appeals-panel ruling issued Monday concludes that the 2013 extension of Washington state’s aerospace tax incentives to secure assembly of the 777X in Everett did not include prohibited subsidies.
There’s still another WTO case yet to be resolved concerning the original 2003 Washington state tax incentives introduced to secure the Boeing 787 Dreamliner for Everett.
But Bob Novick, former general counsel to the Office of the U.S. Trade Representative and now outside counsel to Boeing on the WTO dispute, said that for the 777X incentives dispute, “The case is over.”
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He said previous rulings in the same case had rejected all other claims of prohibited subsidies regarding the 777X incentives and on Monday the appeals court threw out the one remaining claim, which was that the state’s aerospace B&O tax-rate reduction was prohibited.
“There is no other claim in this case,” Novick added. “There’s no compliance obligation by the U.S. Nothing has to be done. The case is now over.”
The initial response to Monday’s ruling from Airbus spokeswoman Maggie Bergsma was succinct: “The case might be over but the game goes on.”
Perhaps she meant that, despite the competing WTO lawsuits that have played out over 13 years so far, neither Airbus nor Boeing has abandoned the disputed practices.
Boeing still seeks and gets government incentives to locate work, most notably the 777X incentive package from Washington state, the biggest corporate tax break any state has ever granted.
Airbus still seeks launch aid from European governments to pay for new aircraft development, most recently for its A350.
But Bergsma’s remark could equally be taken to mean that the grinding WTO legal process continues, despite the loss of this case.
That’s true. In June, a WTO panel assessing U.S. compliance with previous rulings in the original case concerning the 2003 Dreamliner incentives found that, while all other Boeing subsidies have been remedied, the state’s aerospace business tax rate reduction remains illegal — not “prohibited” in WTO legal terms, but still an “actionable subsidy” that must be fixed.
Monday’s ruling, even though it also focuses on the state’s aerospace business tax rate reduction, will have no bearing on that decision, which the U.S. has appealed.
Under WTO rules, a “prohibited” subsidy must be immediately withdrawn, while an “actionable” subsidy requires some lesser remedy. The legal analyses of the two types of subsidy are completely different.
Still, Novick said the U.S. is hopeful of winning that one also on appeal, with a final decision expected in about a year.
The original U.S. case against the Airbus launch aid subsidies, first filed in 2004, should be finally decided first, perhaps by the end of this year.
A year ago in that case, the WTO compliance panel ruled that the European Union had fallen dramatically short of remedying the harm to Boeing from illegal subsidies to Airbus. The EU appealed that decision, and an outcome is expected within months.
The 777X incentives complaint, originally filed in February 2015 and finally resolved Monday, counts as lightning fast in comparison.