The World Trade Organisation (WTO) said Monday that Washington State provided illegal tax breaks to U.S. aircraft manufacturer Boeing in a trade ruling that favors European Union-based rival plane maker Airbus.
Acting on behalf of Airbus, the EU requested consultations with the U.S. in December 2014, alleging that Washington State's conditional tax incentives relating to the development, production and sale of Boeing's 777X jetliner were prohibited under international trade law.
According to EU, seven separate incentives, including "a reduced business and occupation tax rate, credits against business taxation and exemptions from various other taxes" were enacted in Washington State three years ago.
A panel was subsequently set up in February 2015 by WTO's Dispute Settlement Body. After over a year of consultations, it found that one of the seven subsidies was in breach of existing trade rules.
"The Panel has found that the European Union has demonstrated that the B&O aerospace tax rate for the manufacturing or sale of commercial airplanes under the 777X programme... is a subsidy contingent upon the use of domestic over imported goods," WTO ruled.
"Accordingly, taking into account the nature of the prohibited subsidy found in this dispute, the Panel recommends that the United States withdraw it without delay and within 90 days," it added.
Though deemed to be incentives, the six other tax measures were rejected by WTO. Such tax incentives were to greatly help the production of Boeing's 777X jetliner, to be assembled in Washington State.
The wide-bodied, twin-engine aircraft is scheduled to enter into service by the end of the decade. Washington and Brussels have 60 days to decide whether to appeal the panel's ruling.
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