Boeing backs tax-break halt

Washington state measure seeks to avoid retaliatory tariffs

Grounded Boeing 737 MAX airplanes fill a parking area Wednesday adjacent to Boeing Field in Seattle. Washington state lawmakers say they will introduce bills, at The Boeing Co.’s request, to suspend the aerospace giant’s preferential business and occupation tax rate until the U.S. and European Union resolve their international trade dispute.
(AP/Elaine Thompson)
Grounded Boeing 737 MAX airplanes fill a parking area Wednesday adjacent to Boeing Field in Seattle. Washington state lawmakers say they will introduce bills, at The Boeing Co.’s request, to suspend the aerospace giant’s preferential business and occupation tax rate until the U.S. and European Union resolve their international trade dispute. (AP/Elaine Thompson)

OLYMPIA, Wash. -- Washington state lawmakers introduced bills Wednesday, at The Boeing Co.'s request, to suspend the aerospace giant's preferential business and occupation tax rate unless the United States and European Union reach an agreement on their long-running international trade dispute that would allow the lower tax rate.

Democratic Sen. Marko Liias and Democratic House Majority Leader Rep. Pat Sullivan are the sponsors of the companion bills in the Senate and House. Under the legislation, starting on April 1, the company would no longer receive the 40% tax break the Legislature adopted for the aerospace industry in 2003. The tax break was expanded in 2013.

Last year, the World Trade Organization ruled that Boeing received an illegal U.S. tax break from the state that damaged sales by European archrival Airbus.

The decision by the organization's appellate body considered whether the United States had complied with a 2012 ruling that found that plane-maker and defense company Boeing received at least $5 billion in subsidies prohibited under international trade rules.

But the ruling was limited and the decision found no grounds upon which the European bloc could seek damages from an arbitrator, except for the relatively small Washington state tax program -- which the U.S. says was worth $100 million a year.

In a statement, Boeing spokesman Bryan Watt said Wednesday that the company advocated for and supports the legislative action to "resolve the sole finding against the United States in the long-running trade disputes between Europe and the United States over government support for the production of large commercial airplanes."

"This legislation demonstrates the commitment of Washington -- and of the United States -- to fair and rules-based trade, and to compliance with the WTO's rulings," he said.

In December, a trade organization panel ruled that the European Union has not complied with an order to end illegal subsidies for plane-maker Airbus, which prompted the Trump administration to impose tariffs on nearly $7.5 billion worth of EU goods in October.

"Now is the time for Airbus and the European Union to finally come into compliance by ending illegal launch aid subsidies once and for all and addressing the harm they have caused the United States aerospace industry and its workers," Watt said.

Liias said in a statement a legislative solution was a "critically important issue for our state's economy."

"We share Boeing's concern that retaliatory tariffs will hurt not only our state's aircraft industry, but other Washington-based exporters and family-wage jobs here in Washington," Liias wrote. He added that the duties imposed by the EU could have extended well beyond Boeing jets, to agricultural products such as apples and cherries.

What's more, they would come even as Boeing -- the country's largest manufacturing exporter -- struggles to cope with the grounding of its 737 Max jet after two deadly crashes. "Retaliatory tariffs would come at the wrong time," he said. "Boeing is trying to get back on its feet, and we want to stay out of broader trade disputes."

Sullivan said that that goal of the legislation is to "protect family-wage, good-paying jobs provided by the aerospace industry and other sectors that will be impacted by tariffs if the legislature does not act this session."

Gov. Jay Inslee said he would be working with lawmakers and Boeing officials to expedite the bill.

"There is broad agreement in Olympia that we need to act this session to address the WTO issue in order to avoid retaliatory tariffs that would damage not just our commercial aircraft industry, but other important Washington exports," he said in a written statement.

The bills are not subject to normal legislative deadlines because they're considered necessary to implement the budget. The 60-day legislative session ends March 12.

Airbus declined to comment.

Scott Hamilton, managing director of Leeham Co., an aviation consultancy, said the legislation was tactically savvy. "It's a brilliant move on Boeing's part to resolve its side of the WTO trade dispute," he said. "Airbus is now hanging out there with no leverage. Airbus suddenly has a very weak hand."

Even if this dispute is resolved, trade fights over the commercial aircraft industry are likely to continue, said Chad P. Bown, a senior fellow with the Peterson Institute for International Economics, a nonprofit research group. Airbus was created as a government consortium and has received billions in government aid since it was founded in 1970. And as a major military contractor, Boeing has benefited from Washington's largesse.

Still, Bown said Boeing's move was notable. "It's very difficult for Washington state and Boeing to give up their subsidies," he said. "So anytime somebody gives up their subsidies that have been ruled illegal, that's a big deal."

Information for this article was contributed by Rachel La Corte of The Associated Press and by Nelson D. Schwartz of The New York Times.

Business on 02/21/2020

Upcoming Events