WTO Finding: Boeing’s 777 Project was Illegally Subsidized by State Legislature

LeehamNews.com does a great job covering the commercial aviation manufacturing industry, especially the often complex politics surrounding Boeing in the U.S. versus Airbus in the E.U. The latest blogpost, ‘Airbus, Boeing claim victory in today’s WTO ruling over Washington State tax breaks’, goes deep into the WTO panel report that was just issued today: ‘Dispute Settlement – Dispute DS487, United States — Conditional Tax Incentives for Large Civil Aircraft’. Essentially, WTO found Boeing’s 777 project was illegally subsidized by tax incentives created by the state legislature, in House Bill ESSB 5952. That legislation, passed in November 2013, was aimed at securing local jobs, thus improperly favoring the local economy.

This subject area is a bit off-topic for aiREFORM but worth archiving here, as it sheds further light on the extent of subsidy that props up aviation. We often hear that airports and aviation are huge catalysts for local economic development. Well, it turns out, this line is just more spin to dupe elected officials and citizens into accepting the latest aviation development scheme. In most examples, subsidies such as the huge tax reductions and tax credits given to Boeing, come with substantial costs elsewhere. Two key areas where the costs are transferred elsewhere:

  1. somebody has to pay the taxes that are excused when legislators offer sweet deals to large corporations; that burden falls more heavily on the regular Joe taxpayers, the ones raising families, for example.
  2. when jobs are sucked up into concentrated mega-factories, like the new wing production plant in Everett (at KPAE), those jobs no longer exist dispersed over numerous smaller communities. Time and again, those small communities start to shut down and become economic wastelands with relic facilities now standing silent.

When viewed objectively the ‘net economic benefit’ becomes just a wash, really nothing to get excited about.

Much like our federal laws have enabled banks to concentrate and become ‘too big to fail’, laws related to aviation have enabled airlines, airports, and manufacturers to concentrate, becoming ‘too big to function without imposing excessive impacts’. These impacts need to be objectively addressed, not glossed over because they do not conform to a propaganda campaign. Congress has failed us big time, these past few decades, and the trend does not look promising.


UPDATE, 11/29/2016: — Two months ago, WTO made a similar finding, but precisely opposite, finding illegal subsidies of Airbus by the EU. There is an apparent history of legal busy-bodies doing a huge amount of work and rendering critical decisions, but in the end taking no real action to change anything. This pattern is much like we see with FAA’s faux-regulation of aviation interests.
The documentation is deep, but a fascinating read. There is much to be learned about the politics (and complete absence of free and open markets) in aviation, by looking at related articles and past WTO actions. See, for example:
  • 9/22/2016 – a 574-page report issued by WTO, in response to the United States’ complaint against the European Union (EU)
  • 9/22/2016 – 154-page Addendum to the above report. See in particular the Executive Summaries submitted by the two parties.
  • 9/22/2016 – LeehamNews Post summarizing the report issued by WTO.
  • 11/29/2016 – 154-page Addendum to the above report. See in particular the Executive Summaries submitted by the two parties.