Our report explains how Washington’s economy, exporters, and workers prosper under rules-based trade, particularly the World Trade Organization (WTO) and its system for settling trade disputes. By contrast, unilateral approaches to trade—like current tariff wars— are causing significant economic harm to Washington. We recommend concrete steps that Washington’s leaders can take to support the global trade system on which the State’s prosperity depends.
Trade in airplanes—which accounts for an astounding 54 percent of Washington’s goods exports and supports hundreds of thousands of Washington jobs—is a particular focus of this report.
We begin by highlighting trade’s critical role in supporting Washington’s economy, creating opportunities for Washington businesses, and providing good jobs for Washington workers. We then explain the importance of the WTO, its rules against unfair practices like trade-distorting subsidies, and its dispute system designed to ensure that countries play by these rules. Unilateral U.S. tariffs and China’s subsidy and tech practices depart significantly from WTO rules and norms.
Our report then explores the longstanding dispute between the United States and the European Union (EU) at the WTO over subsidies for large commercial airplanes.
We highlight how a final decision by the WTO in 2018—confirming that Europe’s Airbus received more than $9 billion in WTO-illegal subsidies from EU governments that must be remedied— provided a major boost to efforts by the United States to level the global playing field in aircraft trade, to the benefit of Boeing and Washington State. (The WTO originally found that Airbus had received over $22 billion in unlawful subsidies, but later reduced that amount to $9 billion because the passage of time caused the remaining subsidies to age out.)
We note, in particular, that an October 2019 WTO arbitration award authorized the United States to impose $7.5 billion in countermeasures against the EU’s WTO-illegal aircraft subsidies, and explain how the United States has employed this authorization to impose targeted tariffs on politically sensitive EU products—like aircraft, cheese, machinery, and wine—to pressure the EU to eliminate its illegal aircraft aid.
We also detail how a March 2019 final decision in a separate WTO case has found that Boeing received $325 million in WTO-violating subsidies during the period reviewed as a result of Washington’s 2003 reduction in its Business and Occupation tax rate for manufacturers of commercial airplanes. We explain why it’s critical for Washington to revise relevant tax law to comply with the ruling in a way that maintains Washington’s competitiveness in airplane manufacturing, while also avoiding creating a new WTO-violating subsidy by ensuring that any fix is broadly applicable.
Go-it-alone tariffs, in contrast to rules-based trade, are harming Washington’s economy and the State’s manufacturers, farmers, tech firms, and workers. We explain why these actions also sow longer-term business uncertainty and fail to set precedents against emerging trade threats, such as unfair competition from China’s state- subsidized aircraft sector.
Finally, we recommend steps that Washington’s leaders can take to bolster open, rules-based trade. Most immediately, they’ll need to develop a positive, WTO-consistent fix to address the recent final ruling against Washington’s tax treatment for the aerospace sector. Additionally, Washington’s leaders should support other key trade initiatives, including reforming the WTO, reining-in abusive tariffs, expanding America’s network of trade deals, and boosting trade enforcement support for products and services that Washington exports.
