In November 2013, the State of Washington, as part of its efforts to induce The Boeing Company to manufacture its new 777X model of large civil aircraft in Washington State, vastly expanded and amended its existing aerospace tax incentives, thereby providing billions of dollars in additional subsidies to Boeing. These expansions and amendments also made the continuing availability of such tax incentives, in whole or in part, contingent upon (i) siting production of the wings and final assembly for a new commercial aircraft model or variant in Washington State, and (ii) maintaining all wing assembly and final assembly of such commercial aircraft exclusively in Washington State.
III. Legal basis for the complaint
These measures constitute specific subsidies within the meaning of Articles 1 and 2 of the SCM Agreement. Specifically, the measures provide a financial contribution in the form of "government revenue … otherwise due" that is "foregone" within the meaning of Article 1.1(a)(1)(ii), and "a benefit is thereby conferred" within the meaning of Article 1.1(b). For reasons explained in the following paragraph, the subsidies are specific within the meaning of Article 2.3 of the SCM Agreement.
The European Union is concerned that the measures condition billions of dollars in subsidies upon the use of aircraft components manufactured in Washington State. Specifically, conditions contained in Sections 2, 5 and 6 of Substitute Senate Bill 5952 (as codified at RCW 82.32.850 and 82.04.260(11)(e)(ii)) make the subsidies "contingent … upon the use of domestic over imported goods", within the meaning of Article 3.1(b) of the SCM Agreement. Accordingly, the European Union considers that these measures are prohibited subsides that are inconsistent with Articles 3.1(b) and 3.2 of the SCM Agreement.
The current round of WTO aircraft subsidies litigation started back in 2004. Prior to that, there was similar litigation in the GATT. We've now had decades of litigation, with many years to go, and no resolution in sight. This makes me wonder whether litigation is the best approach here. Granted, it's good for my business, so in that sense I'm all for it. But still, perhaps there is a better way.
Maybe that better way is the TTIP. People like to say the TTIP is a "high standards" agreement, full of "ambition." But excluding such an important US-EU trade dispute from TTIP seems like a lack of ambition. As a way to boost momentum in the TTIP, which is struggling these days, and create some excitement, how about we add aircraft subsidies to the list of items on the TTIP agenda? Resolving that dispute with an agreement to lower or eliminate these subsidies would be a huge victory for just about everyone (other than the lawyers, of course).