The World Trade Organization (WTO) declared today that the subsides Boeing receives for the development of the 777X fall under the “prohibited” classification. The OEM receives a preferential business tax rate for the manufacture of the 777X in Everett from the Washington State government. WTO states that this is an anti-competitive practice and thus unlawful, and requires the tax breaks to be eliminated within the next 90 days.
Airbus was quick to hail the decision but Boeing, in fact, declared WTO’s ruling as a “complete victory” pointing out that the original complaint had seven clauses and trade organization rejected six of them. “In total, the EU claimed that Boeing had received $8.7 billion in subsidies. This claim was rejected by the WTO, which found future incentives totaling no more than $50 million a year to be impermissible,” said Boeing. Furthermore, the OEM plans to appeal the decision.
While some are claiming that Boeing is receiving an unfair advantage from the US government, most OEMs receive similar types of financial support. Airbus, for instance, receives government loans at a favorable rate and earlier this year the EU Commission stated that the company had received US$5.7 billion in prohibited aid. Embraer and Bombardier have also received subsides from the Brazilian and Canadian governments, respectively. Just this year, Bombardier received a US$1 billion injection from the Quebec provincial government.
All in all, the ruling is not expected to have a real impact and Boeing seemed confident that the ruling would be overturned on appeal.
Sources: BBC, Bloomberg and Reuters.