SEATTLE _ The World Trade Organization ruled Monday that an extension of a business-tax reduction Washington state granted to Boeing in 2013 for the forthcoming 777X jet is a prohibited subsidy.
The term "prohibited" signifies the WTO's strictest legal category, denoting a subsidy that cannot be allowed to stand. If the ruling is upheld on appeal, action to remove the subsidy would be required.
Yet even then, in a testament to the excruciating frustration of the WTO process, legal experts on both sides of the case say the outcome will almost certainly leave Boeing's bottom line untouched _ and Washington state's tax coffers none the richer.
"You can remove a subsidy in a hundred different ways that don't in any way impact the benefit Boeing might get," said Bob Novick, a former general counsel to the U.S. trade representative and now an outside counsel to Boeing on the WTO dispute.
A lawyer on the European side of the case, who asked not to be identified because he spoke before the ruling is being officially made public, agreed that Boeing, which has a large presence in Washington state, is unlikely to suffer financially.
Monday's ruling is new. It's a separate case from two original WTO lawsuits: one filed by the U.S. in 2004 over the Airbus "launch aid" and a countersuit Europe filed in 2005 over the state tax breaks to Boeing as well as research grants it got from NASA and the Department of Defense.
The European lawyer recalled that when the WTO initially ruled in 2010 that government loans to Airbus to launch its A380 superjumbo jet were prohibited subsidies, Boeing crowed about the outcome and demanded that Airbus either repay or restructure the loans.
That A380 ruling was reversed on appeal a year later. Now, Boeing's biggest tax break is on the same chopping block.
"The tables are turned. Boeing's been tagged," said the European lawyer. "But nothing is actually going to change."
Michael Luttig, Boeing's general counsel, agrees.
"After any appeal," Luttig said, "we fully expect Boeing to preserve every aspect of the Washington state incentives."
And while an Airbus press release hyped the ruling as "a knockout blow to Boeing's record-breaking subsidies" and demanded that the Washington state tax breaks "be withdrawn immediately," Airbus chief executive Fabrice Bregier conceded that he has "little faith in the US compliance with the WTO rulings."
